India’s Finance Minister said that income from crypto assets to be taxed at 30%
The finance minister, FM Nirmala Sitharaman, said this during her third Union Budget speech, “India will be imposing a tax on cryptocurrency incomes of 30% in an attempt to better regulate the ever-expanding world of digital assets.”
Apart from putting cryptocurrencies and non-fungible tokens (NFTs) in India’s highest tax band, Sitharaman also said that losses from their sale can’t be offset against other income. This provides another disincentive to trade and invest in these assets.
There are estimates that there are around 15 million-20 million cryptocurrency investors in India, with a combined holding of 400 billion rupees ($5.37 billion). There isn’t any official data about the size of the Indian cryptocurrency market.
Those who are pro-digital currencies have been hoping that the new tax bill could at least prevent some of the worst-case scenarios for digital currency.
“Thirty percent tax on income from virtual digital assets, while high, is a positive step as it legitimises crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs,” said Avinash Shekhar, chief executive of ZebPay, a cryptocurrency exchange.
Consultants estimate crypto tax to be as high as 30%. Even after you pay the tax, you still have to make monthly payments for transaction fees and other administrative costs.
“If you made a profit of 100 rupees then including the 30% tax bracket, plus surcharge and cess the total tax outgo will be around 42 rupees,” Amit Maheshwari, partner at AKM Global, a tax and consulting firm told Reuters.
Recently, crypto exchanges have been dealing with new banking regulations. These regulations were seen by many as a signal that the authorities are willing to work with crypto companies. They also reassure corporate entities that they can enter into the market without fear of sanctions.
“We also hope this development removes any ambiguity for banks and they can provide financial services to the crypto industry,” said Nischal Shetty, CEO, WazirX, another virtual currency exchange.
India’s central bank claims private cryptocurrencies could cause financial instability. As a result, some banks have cut ties with crypto firms. The finance minister also said that the central bank will introduce a digital currency in the next financial year. He added that they will be using blockchain and other support technologies to do so.
“The introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” Sitharaman added.