Nirmala Sitharaman, Indian Finance Minister while presenting the federal budget 2022, on tuesday proposed taxing income from cryptocurrencies and other digital assets like NFTs at 30% . She said:
I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30%. No deduction in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition.
“There’s been a phenomenal increase in transaction in virtual digital assets,” the finance minister added. “The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”
Sitharaman also announced the launch of a central bank digital currency (CBDC) by 2022-23 as means to boost the country’s economic growth. Sitharaman highlighted the need for digital inclusion across numerous business verticals while announcing the fund allocation set in the Union Budget.
Speaking about the launch of a digital rupee, she added that the introduction of a CBDC will provide a “big boost” to the digital economy. She also highlighted the possibility of a more efficient and cheaper currency management system made possible by digital currencies.
Avinash Shekhar, the CEO of crypto exchange Zebpay, commented: 30% tax on income from virtual digital assets, while high, is a positive step as it legitimizes crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs.
Nischal Shetty, the CEO of crypto exchange Wazirx, commented: “We also hope this development removes any ambiguity for banks and they can provide financial services to the crypto industry.”
The finance minister also highlighted that any losses cannot be used as compensation against any other income source. In other words, investors will not be able to show losses or hacks of cryptocurrencies to offset taxation on profits.
In order to keep track of crypto investments in the country, Sitharaman further proposed to implement a tax deduction at source (TDS) of 1% above a yet-to-be-determined threshold.