It has been quite an awaited day for crypto entrepreneurs, investors, and enthusiasts. Finance Minister Ms. Nirmala Sitharaman today unveiled the budget for the fiscal year 2022-23. And the budget has set the right tone for regulations and the future of digital currency in India.
In a nutshell, the announcement included:
- A new digital rupee powered by blockchain technology will be issued by the Reserve Bank of India starting 2022-23.
- Income from transfer of digital assets will be taxed at 30 per cent rate. This will impact gains from cryptocurrency and NFTs as well.
- No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income
- In order to capture the transaction details, the government has also provided for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gifting of virtual digital asset is also proposed to be taxed in the hands of the recipient.
It is definitely positive news for the crypto community as the Reserve Bank of India had on several occasions earlier said cryptocurrencies like Bitcoin, Ethereum, and Dogecoin among many others pose a risk to financial stability and also question its claims of market value. The government planned to introduce a bill to regulate cryptocurrency in the winter session of Parliament, but it could not happen.
Read what some of the crypto entrepreneurs and experts have to say about it:
Sumit Gupta, CEO and Founder of CoinDCX has welcomed the move in a series of tweets. Here’s what he has to say:
- The introduction of CBDC sends a clear signal of India being a digital-first, efficiency-driven, and transparency-led system. CBDC with the backbone of Blockchain will help us hold a powerful position in the global economy. We welcome this visionary move.
- The budget is forward-looking and inspirational. It has touched key points that’ll help us create modern, powerful, digital, and sustained growth.
- Taxation of Virtual Digital Assets or #crypto is a step in the right direction. It gives a lot of clarity. India’s focus on digital innovation and promotion of blockchain is welcome. The details need to be studied to comment further. But it’s great news for crypto investors in India
Nischal Shetty, CEO of WazirX, an Indian cryptocurrency exchange, has expressed that the announcements made by Ms. Sitharaman are quite positive. On Twitter, he reflected it is futuristic:
- Blockchain powered Digital Rupee by @RBIwill be introduced 2022-23 in India. Great news! More crypto adoption on the way Rocket. Glad to know that RBI will now start getting deeper into crypto. Hope to see banks start getting involved with crypto industry as well
- Hope to see a reduction of crypto ban fear in India. India just taxed crypto. Lot to unpack here but overall this is a very positive step forward for crypto ecosystem in India
Ashish Singhal, Founder and CEO at CoinSwitch, has also welcomed the announcements made today with regards to crypto. On LinkedIn, he writes:
The budget finally answers some important questions on how crypto assets will be taxed. It talks about launching CBDC which will accelerate digitization. Also, improving digital payments will introduce more digital-savvy Indians to explore new forms of investing and wealth creation.
The regulatory guidance on tax from the government furthers the mainstreaming excitement of this emerging asset class with over $6 bn worth of investments in India. It is also the gateway to the future decentralized world.
Today’s digital-savvy Indians are willing to experiment with this emerging asset class. The budget provides clarity on taxation and shows the government’s intent to take a business-friendly approach while protecting the interest of consumers and the exchequer.
We hope to work with the government to help bring crypto-asset taxation at par with other asset classes and participate in the central government’s vision to promote economic growth.
There is some reaction from the international crypto community:
Meanwhile, there has been a lot of criticism by the small-time investors for the 30% taxation part.
There is similar criticism all over the Internet, with people writing 30% tax is too much. One Twitterati wrote, ‘Lets force Modi government to reduce tax on cryptos. 5-10% is fine, 30% is a lot. There will be a huge sell off before April 1. Lesser Indians will invest in cryptos once 30% tax comes into play.’
While there are many clarities awaited on this, Ms. Sitharaman rightly said, “Digital currency will also lead to a more efficient and cheaper currency management system.” The future is certainly bright for the industry and the investors.