India Proposes 30% tax on Crypto and NFTs Income and Seeks to Launch Digital Currency

India like many other countries had been averse to cryptocurrency. Plans were already in motion to ban all crypto transactions as well as pass a law that will criminalize them. However, in a surprising turn of events, India has changed its stance on crypto and embraced it. 

On Tuesday the 1st of February 2022, the Indian government announced plans to impose a 30% tax on income gained from digital assets like cryptocurrencies and non-fungible tokens (NFTs), in a move that will assuage earlier concerns about the country imposing an outright ban on cryptocurrencies. Income generated from the transfer of any virtual assets will be taxed at 30% along with an additional 1% tax deduction at source during such transfers, finance minister Nirmala Sitharaman said in her annual budget speech in India Parliament on Tuesday. Crypto investors in the country will also not be able to offset their losses from cryptocurrencies against any other source of income. 

However, tax consultants warned that individuals could end up paying more than 30% of their crypto profits in tax and other charges. Amit Maheshwari, a partner at tax consulting firm AKM Global, told Reuters: “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.”

On the announcement, Harish Prasad, Head of Banking, India, stated that “This has been a much-awaited announcement in the context of the interest and growth in investments into these assets. The uncertainty and concerns on the legal, regulatory, and taxation status of cryptocurrencies are addressed to a reasonable extent by virtue of this announcement.”

Another announcement the Indian finance minister made on Tuesday was about the launch of the country’s central bank digital currency (CBDC), the digital Rupee. She said the central bank, the Reserve Bank of India (RBI), will introduce a digital currency starting in the financial year 2022-23, stating that the introduction of a central bank digital currency will give a boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system.

The move to tax and regulate cryptocurrency and NFT has been on the rise for quite some time. However, with the third-largest economy in Asia now taxing these digital currencies, it could provide a way for more countries to become amenable to cryptocurrency. 

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