Union Budget 2022: India introduces 30% cryptocurrency tax; how it will affect you

Finance minister Nirmala Sitharaman in her 2022 Budget Speech Tuesday said that 30 per cent tax would be charged on income from the transfer of virtual digital assets. The finance minister said that while computing such income, no deduction with respect to expenditure or allowance shall be incurred, barring the cost of acquisition. She added that the loss from the transfer of cryptos or any digital asset cannot be set off against any other income. The announcement of a heavy tax on crypto income has come as a big disappointment for crypto investors as Sitharaman also gave no relief in case of losses. The finance minister also said that gifts in virtual digital assets would be taxed in the hands of the recipient. “Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset the rate of 1 per cent for such consideration above a monetary threshold,” Sitharaman said in her Budget speech. Earlier Executive Director-Policy and Special Projects, CoinDCX Manhar Garegrat wrote , “The cryptocurrency sector in India is riddled with regulatory bottlenecks which makes it challenging to operate retail businesses. The finance minister should consider formulating policies to leverage growth from emerging technology such as blockchain tech which serves as the backbone of crypto. The hope that CEO & Co-Founder, GoSats-bitcoin stacking platform Roshan Aslam pinned earlier that “the finance minister could officially acknowledge the potential of the crypto industry in the country and pave the way for its inclusion within the financial ecosystem” may have been fulfilled but there are too many steep clauses for now. “Tax on virtual goods is indirectly good as it now brings digital currency under regulatory supervision, a very positive push for cryptocurrency and Web 3.0. This would incentivize startups to create more products and services in the blockchain ecosystem,” said Harsh Shah, a co-founder of Fynd, an omnichannel platform backed by Reliance. However, Sitharaman announced the introduction of a Digital Rupee using blockchain and other technology. She said the introduction of a Central Bank Digital Currency will give a boost to India’s digital currency. Experts said the 30 per cent tax levied on income arising from the sale of cryptocurrency is similar to the tax rate on winnings from lottery, game shows, puzzles etc. Digital currency and assets like NFTs (non-fungible tokens) have gained traction globally over the last couple of years. Trading in these assets has increased manifold with cryptocurrency exchanges being launched. However, India did not have a clear policy on either regulating or taxing such asset classes. NFTs are unique digital assets with verified ownership rights and the details are stored on a blockchain. Nangia Andersen India chairman Rakesh Nangia said the government has walked the talk on a stable and predictable tax regime and transfer of virtual digital assets have been brought under the taxation ambit. With inputs from PTI

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