India to Introduce a 30% Crypto Tax, Push Out CBDC by 2022-23

Indians will not be allowed to deduct expenses or allowances when calculating crypto income except the cost of acquiring them

article-image

Finance minister of India Nirmala Sitharaman. Credit: Shutterstock

share

key takeaways

  • India’s finance minister announced Monday that the country is looking to tax income received from crypto transfers by 30%
  • The country also looks set to introduce a CBDC by 2022-2023 with the aim of streamlining India’s currency management system

For the first time, India looks poised to introduce a 30% tax on income received from crypto gains alongside the introduction of a central bank digital currency (CBDC).

India’s Finance Minister Nirmala Sitharaman proposed the new measures during the country’s 2022-2023 budget speech to parliament on Monday. India is hoping to generate additional revenue from crypto profits and streamline its tax regime, coinciding with a “cheaper currency management system.”

It is a major development for the country and regulators, which have teetered on the issue of crypto ever since the nascent asset class began popping up on Indian exchanges in 2012.

“There has been a phenomenal increase in transactions in virtual digital assets,” said Sitharaman. ” The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”

Indians will not be allowed to deduct expenses or allowances when calculating crypto income except the cost of acquiring them, the minister added. Sitharaman also proposed deducting tax at the source (known as TDS) at a rate of 1% above a monetary threshold.

Those receiving crypto as a gift will also be subjected to taxation, while the loss incurred from crypto transfers will not be allowed to be offset by any other income, the minister added.

“It is a very progressive move,” Indian resident and co-founder at FV Bank Nitin Agarwal told Blockworks in an interview.

“By having 1% tax as TDS on transfers, there will be a mechanism to track and report the crypto transfers by the exchanges.”

Meanwhile, the country is expected to introduce a digital rupee by 2022-2023 which will be issued by the Reserve Bank of India (RBI), the nation’s central bank.

“[The] introduction of central bank digital currency will give a big boost to [the] digital economy,” said Sitharaman, who added the introduction of a CBDC would lead to a more efficient monetary system based on “blockchain and other technologies.”

In December 2017, the RBI and the Ministry of Finance issued statements comparing crypto to Ponzi schemes. Four months later, the central bank issued a circular prohibiting commercial banks and lenders from dealing in crypto as well as prohibiting them from servicing entities dealing in digital assets.

That banking ban was eventually overturned by India’s Supreme Court in March 2020, which labeled the central bank’s circular as “unconstitutional.” At the beginning of last year, India’s government said it would introduce a bill to create its digital rupee while at the same time banning “all private cryptocurrencies.”

The bill has not yet been made public, but it is understood crypto will be allowed as an investment asset class, courtesy of a fresh tax, but prohibited for use in payments.

“CBDCs are being tested by many governments and will take time to mature,” added Agarwal. “But one of the top six economies in the world working on this is extremely positive.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Continued demand for bitcoin ETFs coupled with greater demand for bitcoin from exchanges is contributing to price moves, analysts say

article-image

Morpho Blue is designed in a way where risk management is externalized, Morpho Labs’ CEO said

article-image

Snowflake, a cloud-based data warehouse solution, has partnered with Dune to make curated blockchain data available to its clients

article-image

Crypto is fast and it’s only getting faster as bitcoin threatens to retest its own highs set more than two years ago

article-image

The settlement ends the legal battle over eth.link, a domain once owned by imprisoned developer Virgil Griffith

article-image

TBC President Lee Bratcher told Blockworks he’s “confident” about the Council’s case against the DOE