India welcomes the new crypto tax regime, as the government announces a flat 30% tax on income from all digital assets.
Crypto Becomes Legal Asset
In the 2022 Budget Speech, Finance Minister Nirmala Sitharaman announced that all income generated from the transfer of virtual digital assets will now be taxed 30%. This would also include virtual digital assets as gifts, which would be taxed in the hands of the recipient. Other than levying the tax rate, this announcement also marks the occasion of cryptocurrencies becoming a legal asset class in India.
“Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent.”.
Furthermore, she also stated that other than the cost of acquisition, the taxed amount will not make concessions for any deductions with respect to any expenses. The loss from the transfer of virtual digital assets can also not be set off against any other income.
Additionally, in the speech, Sitharaman also talked about providing for TDS of 1% on the payment made in relation to transfer, above a monetary threshold.
Indians Welcome Crypto Clarity
Despite the hefty taxation on crypto assets, the industry and experts are welcoming the flat rate. Furthermore, the announcement did not hurt the values of popular crypto tokens like BTC, ETH, WRX, SOL, ADA, DOGE, and MATIC. Most experts in the industry were focusing on crypto being classified as a legal asset class, with detailed provisions for TDS and TCS.
Elaborating further from the perspective of crypto investors, Anish Shah, BDO India LLP, commented,
“Introduction of taxation on transfer of Virtual digital asset is a welcome move and will give upfront clarity to the investors on how their income would be taxed.”
Sitharaman also announced that the RBI would be launching its own central bank digital currency (CBDC) by 2023.
Sundara Rajan TK, Partner at DVS Advisors LLP, noted,
“The clarity on tax of digital assets is long over due and was expected to be provided this year. The announcement of tax @ 30% on digital asset, coupled with the government launching its own digital currency, is an indication that the government intends to discourage the same and would intend that only the HNIs make such investments and that the government shall not permit cryptos as currency.”
PM Modi’s Views On Crypto Regulation
As a cabinet minister in the Modi government, Sitharaman has found it imperative to structure a specific tax regime due to the monumental growth of cryptocurrencies and transactions of virtual digital assets. In fact, PM Modi had recently spoken on the matter of cryptocurrencies at the 2022 World Economic Forum’s virtual Davos Agenda conference, where he called for the need for global regularity in crypto regulations.