India has announced a 30% tax on income from the sale of cryptocurrencies. In addition, the country intends to launch a digital rupee starting April 1.
India has come even closer to adopting cryptocurrencies after years of uncertainty in its stance. The Reserve Bank of India will launch its digital currency this year starting April 1, Finance Minister Nirmala Sitharaman said in her budget speech on Tuesday, according to Bloomberg. India is joining countries including China in promoting digital versions of their currencies as they seek to use new technologies to make transactions more efficient. The finance minister said the launch of the digital rupee would lead to cheaper and more efficient currency management. The Reserve Bank of India is working on a phased-in strategy that could reduce the country's high reliance on cash.
In addition, India also plans to tax income from the sale of virtual assets at a rate of 30%, which eliminated the uncertainty regarding the legal status of such transactions. “There’s been a phenomenal increase in transactions in virtual digital assets,” Sitharaman said. “The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”
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. “No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of digital asset cannot be set off against any other income,” Sitharaman said. “Gift of virtual digital asset is also proposed to be taxed at the hand of the recipient.”
“Imposing the tax rate makes crypto trading official now and any concern of a ban is off the table,” said Darshan Bathija, co-founder and chief executive officer of Vauld, a crypto exchange platform based in Singapore. However, there are fears that the relatively high tax rate could encourage traders to move to platforms in other countries, which would cut into the Indian government's revenue, he added.
So far, there is no law in India regulating the trading of cryptocurrencies, although a ban was proposed at the beginning of last year. Despite this, cryptocurrencies continue to enjoy high popularity among Indians. According to an October report from industry research firm Chainalysis, the local market is up 641% in the year to June 2021.
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