Photo courtesy Kanchanara on Unsplash.
Cryptocurrency has seen phenomenal growth in India and the crypto market is growing very fast. The steep rise in the price of Bitcoin and the other Altcoins has attracted many investors and traders who wish to benefit from the quick rise in the price. According to the broker discovery platform, BrokerChooser India has the highest number of crypto owners in the world.
The cryptocurrency bill which was supposed to be presented in the Parliament in the winter session of 2021 got delayed. There was no clarity on the taxation aspects and in the last few months, there were rumors that crypto trading would be banned in the country. The RBI, in 2018 had tried to impose a ban by restricting banking facilities to the crypto exchanges which was later overturned by the Supreme Court of India.
The budget presented by the Finance Minister on 1st February 2022 has provided some clarity on the taxation aspects of cryptocurrencies. The Finance Minister has announced that digital assets would be taxed at a rate of 30%. This includes cryptocurrencies, non-fungible tokens (NFTs), and the other ways people earn from digital assets like mining.
The Finance Minister further said that no deduction in respect of any expenditure or allowance would be allowed while computing such income except the cost of acquisition. The loss arising from the transfer of virtual assets can’t be set off against any income. Gifts in virtual assets would be taxed in the hands of the recipients. There is TDS on the payment made in relation to the transfer of virtual digital assets at a rate of 1 percent above a monetary threshold.
There are plans to launch an Indian Central Bank Digital Currency (CBDC) using blockchain and the Reserve Bank of India has been working on an implementation strategy for CBDC. The government’s Cryptocurrency Bill is still in the drafting stage and is yet to be introduced in the parliament. The taxation of digital currency in the budget has given some assurance to the investors that it would not be outlawed in the country.