Finance Minister Nirmala Sitharaman, presenting the Union Budget 2022 in the Lok Sabha on Tuesday, said that the 'Digital Rupee' will be rolled out by the Reserve Bank of India in the financial year 2022-23. The central bank digital currency (CBDC) will use blockchain technology.
She also announced that any income from the transfer of virtual digital assets will be taxed at 30 percent. This will include cryptocurrency and non fungible tokens (NFTs).
"The digital rupee will be issued by the RBI. That will be the digital currency. Everything that prevails outside of it, digital whatever, are assets being created by individuals. And if in those transactions, profits are being made, we are taxing that profit."Nirmala Sitharaman, post-budget press conference
Here are some highlights of this new tax regime for digital assets:
Any income from transfer of an virtual digital asset (cryptocurrencies, NFTs) will be taxed at a flat rate of 30 percent.
No deduction will be allowed while filing taxes, except cost of acquisition.
Losses from selling virtual digital assets can only be set off against gains from sale of virtual digital assets, not other types of investments.
For digital assets given as gifts, the recipient will have to pay taxes.
1 percent tax deductible at source (TDS) will be applied while buying/selling digital assets above a certain threshold.
What are CBDCs?
A central bank digital currency (CBDC) is a digital version of a country's fiat currencies, like the Rupee or the Dollar. Since they're backed by the central reserves, they are as stable as their physical counterparts, unlike decentralised cryptocurrencies such as Bitcoin and Ether.
The 'Digital Rupee' announced by the finance minister is going to be the digital representation of the Indian Rupee, backed by the Reserve Bank of India (RBI). It will have the same value as a physical rupee.
Apart from India's RBI, several other central banks across the world experimenting with CBDCs, including the United States' Federal Reserve. In October 2020, Nigeria became the largest country to fully roll out a digital currency (eNaira).
(This is a developing story, more details will be added shortly)
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