In another turn of events involving India’s crypto policy, the country’s Finance Minister Nirmala Sitharaman has proposed to tax gains from crypto transfers at a 30% rate, with no deductions to be allowed. Moreover, the country’s central bank digital currency (CBDC), the digital rupee, is to be rolled out by the Reserve Bank of India (RBI), the country’s central bank, in the years 2022 to 2023, she said.
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WRX, the native token of Indian crypto exchange WazirX, skyrocketed following the news before trimming some of its gains. At 08:55 UTC, it traded at USD 0.996 and was up by 27% in a day, trimming its monthly losses to 17%. Bitcoin (BTC) traded at USD 38,773 and was up by more than 4% in a day.
The legislation would also introduce a 1% tax deducted at source (TDS) rate which allows the government to collect a levy at the source from where an individual’s income is created for crypto transfers that pass a threshold that is to be determined.
The government’s Income Tax Department states the “concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.”
Local observers were fast to analyze the legislation’s potential impact on the profitability of crypto investments and transactions.
“There is some clarity on the taxation digital currencies. Prima facie [at first sight] it seems digital currencies will be taxed akin to speculative income at 30% flat on a gross basis. Further, the introduction of TDS on crypto-transfers will enable the government to better monitor crypto transactions,” Amit Singhania, Partner at local law firm Shardul Amarchand Mangaldas & Co, told The Financial Express.
“No deductions for computing income except acquisition cost. Losses cannot be set off against other income. Crypto gifts will also be taxed,” commented Rajeev Mantri, Managing Director at Indian venture capital firm Navam Capital.
Also, addressing the Indian parliament in her speech on India’s 2022 budget, Sitharaman was quoted by The Indian Express as saying that the CBDC will “lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce digital rupee using blockchain and other technology to be issued by the Reserve Bank of India”.
The latest development comes as Indian decision-makers continue to discuss the provisions of a bill on cryptoassets. The debate on the legislation has been marked by numerous twists and turns, with a cabinet note on the proposed bill reported last December suggesting that cryptoassets will not be recognized as legal tender in India, but regulated as assets.
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