Presenting the Union Budget 2022 on Tuesday, Finance Minister Nirmala Sitharaman announced that any income from the transfer of 'virtual digital assets' would be taxed at 30 percent.
She also said that the 'Digital Rupee' based on blockchain technology would be rolled out by the RBI in the financial year 2022-23. Coin Crunch CEO Naimish Sanghvi talks about the implications.
Tax, TDS, Digital Rupee
According to Sanghvi, there were three announcements of note.
1. Any income from the transfer of a virtual digital asset (cryptocurrencies, NFTs) will be taxed at a flat rate of 30 percent.
2. A 1-percent tax deducted at source (TDS) will be applied while buying/selling digital assets above a certain threshold, in order to keep track of transactions.
3. 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.
Sanghvi notes that the new regime won't bring much change for investors or those who are looking to invest in cryptocurrencies.
"We were already supposed to pay tax on all the profits we generate from cryptocurrency trading. However, now that there's a fixed regime, we cannot accommodate our earnings into different brackets of income tax, we just have to pay 30 percent," he says.
'Crypto Not Out of Legal Grey Area'
Elaborating on the motivation behind this move, Sanghvi says, "I don't think this move is to bring crypto out of the legal grey area. I think this is to streamline the revenue that the government can earn from people who are investing in cryptocurrencies and making profits from it."
The government also is aiming to reduce the number of casual investors engaging in the crypto market without proper research or an understanding of the risks involved.
Sanghvi sees the introduction of the Digital Rupee as the government trying to keep up with the global ecosystem. "As a use-case, I think CBDCs are not required in India. India is a phenomenal country with robust digital payments systems that put to shame developed countries," he says.
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