Earlier this week, India had made public its plans for introducing a digital currency that will launch next year. The Government has proposed taxing virtual assets such as cryptocurrency and NFT, as it joins the list of countries willing to recognize digital currencies as legal tenders.
As per Finance Minister Nirmala Sitharaman, the Indian Government is looking to tax income from the transfer of virtual assets at 30%. She added that 1% tax has to be deducted at source on payments made to purchase digital assets.
It comes as no surprise that the government is taking a conservative approach to the taxation of crypto assets. The Finance Minister also said that gifts in the form of virtual digital assets would also be taxed in the hands of the recipient.
The crypto industry and experts in India welcomed the 30% tax rule, in addition to this, there was no significant change in the prices of most crypto tokens such as Bitcoin, Ethereum, Doge, and so on
The Finance Minister also added that there will be no deduction in respect of any expenditure or allowance shall be allowed while computing such income minus the cost of acquisition. The loss arising from the transfer of virtual digital assets cannot be set off against any other income.
The Government of India will also be issuing a blockchain-based and RBI-backed Central Bank Digital Currency in 2023. The taxation of virtual assets paired with the development of the government’s own digital currency is an indication that the government is trying to ensure people invest in a government-backed currency rather than in different cryptos that do not carry any solid backing or safety net.
Ahead of this year’s budget, Crypto experts and investors were a bundle of nerves as they did not know what to expect, considering the government was hostile towards cryptocurrencies earlier with the crypto bill last year. The new rules are a step in the right direction for the government.
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