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India adopt New Digital Rupee and New Tax for Cryptocurrency
The Budget presented by the Finance Minister of India Nirmala Sitharaman on 1st February of this fiscal year, in which she outlined the plans for a 30% tax on income from digital fortune. This step was taken as “ There has been a phenomenal increase in deals in virtual digital means. The magnitude and frequencies of these deals have made it imperative to provide for a specific duty governance. Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 percent, she said in her budget speech.
- She also mentioned that no deduction in respect of any expenditure or allowance shall be allowed while calculating alike income except cost of acquisition. Further, loss from transfer of virtual digital asset can not be set off against any other income.
- She further said, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to 24 transfer of virtual digital asset at the rate of 1 percent of alike consideration above a monetary threshold and gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
“ Introduction of Central Bank Digital Currency (CBDC) will give a big boost to digital economy”, Ms Sitharaman said on Tuesday.
Digital currency will also lead to a more efficient and cheaper currency management system.
It is, accordingly, proposed to introduce “ Digital Rupee”, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23, said Ms Sitharaman in her budget speech.
The government has also sought to amend Section 2 and 22 of the RBI Act, 1934, to provide clarity that CBDC should also be regarded as bank notes. multiple central banks of major economies are also exploring the possibility of introducing a CBDC.
Meanwhile, India is the latest major economy to announce an official virtual currency, as China has been trialling the digital yuan ahead of this month's winter Olympics and has banned cryptocurrency trading and mining.
In the UK, The Bank of England and the Treasury are exploring a implicit central bank digital currency.
India's plan to introduce a digital rupee was welcomed by cryptocurrency traders.
“The Budget made way for the digital rupee, which is a monumental step in driving the coming phase of growth in the digitisation of financial services and payments in India. It'll bring efficiency in transactions,” said Vijay Shekhar Sharma, chairman, managing director and CEO of Paytm.
In a post-budget interview, the Finance Minister said that she couldn't do anything on regulating or formalising a framework for regulation of cryptocurrencies or other virtual digital assets. Apart from the Finance Minister’s caution on the issue, the government is yet to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill.
Despite this Cryptocurrency investors and coin exchanges believe that the government moving to tax them provided them with clarification as well as the first step in sooner or later legitimisation of this asset class.
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