India has finally implemented a crypto tax and a digital currency!
30% Tax on Digital Assets
On Tuesday, Feb. 1, Indian Finance minister Nirmala Sitharaman announced flat 30% taxation on profits from digital virtual assets or crypto in the country’s annual budget-22 speech to Parliament.
India also planned to impose a 1% tax deducted at source, or TDS, on payments related to the transfer of digital assets.
She further stated that no set-off will be allowed in the event of losses. Furthermore, gifts of virtual digital assets would be taxed in the recipient’s hands.
Considering the remarkable increase in transactions of virtual digital assets, Minister Sitharaman said the magnitude and frequency of transactions in “virtual digital assets” have made it essential to propose a specific tax system.
This will take effect on April 1, 2023, and the taxes will be levied beginning with the FY24 assessment year.
The announcement of a tax on virtual assets in the budget created a buzz in crypto industry and among investors.
The crypto businesses and experts embraced the 30% tax rate on digital asset income.
Experts say, clarity on tax will bring more people into the crypto industry, so it will boost industry growth. On the other hand, while cryptocurrency earnings will be taxed, the legalities, classification of multiple cryptos, and regulation will only be unveiled in the upcoming crypto bill.
Announcement and clarifications on Crypto legalization
The Indian government has yet to clarify whether digital currencies such as Bitcoin are considered legal money.
Sitharaman stated during a post-budget press conference that consultations on crypto regulation are continuing, adding that what is legal and what is not will be obvious once the regulatory framework is finalised.
People who invest in private cryptocurrency should be aware that it is not backed by the government. The finance secretary noted that there is no guarantee that your investments will be profitable or not, and that the government is not responsible for the investments.
With the government imposing taxation on virtual digital assets, the crypto industry has received a positive ray after years of debate. The selling or purchasing of cryptocurrency is not illegal, according to the finance secretary. It is entirely at your own risk.
What is Digital Currency?
The digital rupee will most probably be released in the 2022–2023 timescale, according to Sitharaman, which is the first time the Indian government has given a time frame to initiate central bank digital currency (CBDC).
Speaking on the adoption of digital currency she stated, the Reserve Bank of India (RBI), will introduce a digital currency in the next financial year using blockchain and other supporting technology.
“The introduction of a central bank digital currency will provide a significant boost to the digital economy, and a more efficient and less expensive currency management system.” — Nirmala Sitharaman stated during the presentation of the federal budget on Tuesday.
The digital rupee will probably be a key player in eliminating corruption in subsidies and welfare schemes along with total transparency of money flow in these processes.
We strongly believe the current crypto currencies are more of a speculative commodity rather than a currency that is used in commerce transactions. Considering its very speculative nature and a volatile but multi-bagger returns history, we would suggest investors with not only high-risk appetite but also high-risk capacity be exposed to such investments.
The proportion of exposure towards crypto currency investments in one’s portfolio is very subjective and should definitely be supervised by an expert with knowledge as well as experience in these investments.
We strongly suggest investors that who have fulfilled their basic and future financial needs and goals without any liabilities get exposed to volatile and speculative investments like crypto currencies.