Crypto-related activities have surged in Asia in the past few years. India accounts for the most crypto ownership on the continent. However, despite the fame blockchain enjoys in India, the nation’s government wavered in choosing a stance. Finally, Indian authorities have moved in the direction of the digital revolution.
Indian finance minister Nirmala Sitharaman recently discussed the country’s 2022 budget. She stated that the Reserve Bank of India will launch its digital currency later this year. Nirmala added that the central bank’s digital currency would boost India’s economy.
India’s finance minister also mentioned that digital currencies would provide a more efficient and cost-effective money management mechanism. She said, “It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23.”
India to Introduce Crypto Tax
As part of its plans to grant crypto transactions legitimacy, Nirmala proposed a 30% crypto tax. This new levy targets all forms of virtual asset transfers. The finance minister did not use the terms “cryptocurrency” and “crypto” during her budget discussion. Instead, she used the broader term “virtual digital asset” as an umbrella for both cryptocurrencies and non-fungible tokens. Unlike in the US and other countries, India’s new policy means that traders will pay tax on their gains. However, there will be no tax deduction for losses. This means that investors cannot use cryptocurrency deficits or thefts to reduce taxation on earnings.
Part of the statement said. “Any income from transfer of any virtual digital asset shall be taxed at the rate of 30%. No deductions in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition.”
This proposal means that investors will pay a 30% tax on any profits from trading or investing in cryptocurrencies. According to analysts, this will incur an additional burden on crypto investors, who must pay a third of their profits in taxes.
Tax on Crypto “Gifts”
Furthermore, India plans to tax anyone who receives cryptocurrencies as gifts. The receiver of such a present will be subject to a 30% tax. This decision would possibly influence “airdropped” crypto assets.
The tax proposal comes as the Indian crypto community continues to record huge profits and growth despite regulatory limitations. The growth of crypto and NFTs in India has led to several new projects. In addition, a huge number of crypto projects work toward building affiliations with the Asian giant. For example, the famous venture capitalist Andreessen Horowitz made its first investment in the Indian market last year. However, there are questions about whether the proposed tax would dissuade traders.
Will the Tax Affect Crypto Growth?
India’s new crypto tax plans left businesspeople, investors, and the general public confused. Everyone wonders how the country intends to deal with cryptocurrencies. Some asked if the country openly accepts crypto as legal tender. However, others felt the proposal would curb growth.
Some analysts worry that the 30% tax may discourage regular investors. Some suggested that people would liquidate their crypto holdings and transfer them to the stock market. Furthermore, some investors called for the formal recognition of cryptocurrency in India. But, it appears that the country awaits a global stance.
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