The Reserve Bank of India (RBI) will launch India’s official digital currency, Digital Rupee, using blockchain in the financial year 2022-2023, and moving forward, all digital assets will be taxed at 30%, the Minister for Finance and Corporate Affairs, Nirmala Sitharaman announced on Tuesday.
The 30% tax will be imposed on income emerging from crypto and NFT transactions, with any such digital asset gifts to be taxed at the hands of the recipient.
During her annual budget speech in New Delhi, the Finance Minister also said that the Central Bank Digital Currency (CBDC) — the Digital Rupee — would give a significant boost to India’s digital economy and make currency management cheaper and more efficient.
“The magnitude and frequency of transactions in virtual digital assets have increased phenomenally, making it imperative to impose a specific tax regime. Any income from transfer of any virtual digital asset shall be taxed at the rate of 30 percent,” said Finance Minister Nirmala Sitharaman. “The scheme would not allow any deduction in respect of any expenditure or allowance while computing such income except the cost of acquisition.”
Furthermore, Sitharaman also said that any loss from the transfer of a digital asset could not be offset against any other income, which might be a deterring factor for crypto investors.
What does the 30% tax mean for crypto’s legitimacy in India?
Despite the uncertainty, the Indian crypto market has seen massive interest from investors. India’s unregulated cryptocurrency market has an estimated tens of millions of active crypto investors with transactions in billions of dollars annually. While the 30% tax doesn’t regulate the market yet, it has given hope to crypto investors and companies such as Coinswitch Kuber, Binance-owned WazirX and ZebPay.
The crypto market saw a slump in November 2021 following the proposal of The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which aimed to create a framework for the official digital currency and prohibit all private cryptocurrencies in India, barring exceptions that are essential to “promote the underlying technology of cryptocurrency and its uses”.
Until the said bill is passed and crypto is regulated, entities can’t offer crypto trading. The 30% tax in no way, shape, or form legalises or regulates cryptocurrencies in India at the moment, but it sure will help the government wet its beak from the well of crypto and NFT transactions.