Cryptocurrency tax of 30 pct introduced by FM Nirmala Sitharaman

Budget 2022 speech by the Union Finance Minister Nirmala Sitharaman was short on numbers but she did introduce a number of things on technology and that includes digital currency too. The FM has announced on Tuesday that earnings or income from digital asset transfers will be taxed at a rate of 30 per cent. In short, the government will impose a cryptocurrency tax going forward. In an indirect way, the government seems to have legalised cryptocurrencies in India simply because it will impose tax on it.

Not just income, FM Sitharaman also said that gifts received in the form of cryptocurrencies will also be taxed at the same rate. Cryptocurrencies gifts will be taxed at the receiver's end.

"I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent. No deduction in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition," Sitharaman said.

In another digital currency move, the Finance Minister also announced that the Reserve Bank of India will issue a digital rupee and that this will happen as soon as the next financial year.

The Budget has also clarified that losses from transfer of digital assets can’t be set off against any other income.

The crypto market in India grew 641% in the year through June 2021, according to an October report from Chainalysis, an industry research firm.

"The announcement of tax at 30% on digital assets, coupled with the government launching its own digital currency, is an indication the government intends to discourage it and that only high-net-worth individuals (HNI) could make such investments and that the centre shall not permit cryptos as a currency," Reuters quoted Sundara Rajan TK, Partner at DVS Adisors LLP.

"The capping of surcharge at 15% is welcome and though no separate relief was given to HNIs, this would also be favourable to such HNIs with high-capital-gain income," he added.

"On the litigation front, the announcement that appeals shall not be made in case of similar issues of law pending before the High Court and Supreme Court is an important step in reducing the litigation," he averred.

"Legalising cryptocurrencies the finance minister has imposed a 30% tax on cryptocurrencies and NFTs brings it at par with those charged on speculative income. Thought on higher side, traders can now trade in these assets without fear of government intervention. The Budget has removed the legal uncertainty on Crypto Currency trading. People can trade in Crypto but they will have to pay tax. It is to be checked in fine prints, that if corporates trade in crypto then, the corporate tax is applicable or 30% or whichever is higher," said Vikas Singhania, CEO, TradeSmart.

“The budget has come up with a mixed bag of emotions, the government has definitely made a bolder decision with the involvement of technology and we can clearly see that they are moving in a direction of accepting the importance of digital assets by taxing them, this is a huge advancement for the digital currency market, also looking forward to RBI launching its own digital currency and its implementation, all these steps will bring more relief to the digital investors who have invested their money in digital assets," said Rahul Raj Singh, Director, Marketing and Sales, Catseye Systems and Solutions.