In a breakthrough moment for the crypto industry in India, the Union Finance Minister Nirmala Sitharaman has said in her budget speech on Tuesday that the income from crypto trading would be taxed at 30%. Though her announcement doesn’t make crypto legal, it does give official recognition to these digital assets, bringing much-needed legitimacy to the sector.
For years, there have been reports of an imminent ban on private cryptocurrencies in India but today’s announcement closed that chapter, crypto industry stakeholders, including founders, venture capitalists and policy experts, told ET. To be sure, several lawyers ET spoke to said the industry remains in a legal grey area, and that only a full-fledged cryptocurrency bill would give these assets full legal status.
The crypto industry had been expecting clarity on taxes in the budget. ET reported in January that industry body IndiaTech had appealed to the government to tweak existing tax laws to include crypto assets, and to provide clarity on taxation and disclosures.
Here's what Sitharaman proposed in her speech:
- Any income from transfer of crypto to be taxed at 30%.
- No deductions allowed while computing such income, except the cost of acquisition. Losses can not be set off against any other income.
- To capture transaction agents, 1% TDS on purchases (above a certain threshold) made with virtual currencies.
- Gift taxes if any will be the liability of the recipient.
- The amendments will take effect from April 1, 2023.
“There has been a phenomenal increase in transactions of virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime and accordingly, for the taxation of virtual digital assets I propose to provide that any income from the transfer of any virtual digital asset shall be taxed at a rate of 30%,” said Sitharaman in her address on Tuesday in Lok Sabha.