By John Ikani
India has brought cryptocurrencies and non-fungible tokens (NFTs) under a tax net, with the unveiling of a tax regime on any income from the transfer of virtual digital assets.
The move which effectively removes uncertainty about the legality of such transactions was announced by Finance Minister Nirmala Sitharaman.
“There’s been a phenomenal increase in transactions in virtual digital assets,” Sitharaman said in her annual budget speech on Tuesday.
“The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”
Income from the transfer of any virtual assets will be taxed at 30%, Sitharaman said. To capture details of all such crypto transactions, she also proposed a 1% tax deduction at source on payments made related to purchasing of virtual assets.
Among the rules for the tax treatment of digital assets are that losses from the sale of crypto assets cannot be set off against any other income, and digital asset gifts will be taxed in the hands of the recipient.
Speaking on the adoption of CBDCs, Sitharaman said that a “digital rupee” will be “issued using blockchain and other technologies; to be issued by RBI starting 2022-23. This will give a big boost to the economy.”
When asked later on about taxing crypto transactions without regulation, the Finance Minister said, “We have circulated a paper, inputs are coming in, public stakeholders are coming in so regulation goes through that process. I don’t wait till regulation comes into place taxing people who are earning profits. Can I?”
The words crypto or cryptocurrency weren’t used in the budget speech. However, the Minister used the phrase “virtual digital asset,” which the industry interprets as a term for cryptocurrencies and NFTs.
The naming and the steps taken don’t mean crypto is now legal, but the industry views the moves as steps toward giving cryptocurrencies legitimacy.