India on Tuesday proposed launching a digital rupee by next year and a 30% tax on income from transfer of virtual digital assets such as cryptocurrencies and NFTs in one of the most remarkable tech and business-focused federal budgets presented by New Delhi.
To capture details of all crypto transactions, India also proposed a 1% tax deduction at source on payments made related to purchase of virtual assets, the nation’s finance minister Nirmala Sitharaman said Tuesday.
“No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of digital asset cannot be set off against any other income,” she said. “Gift of virtual digital asset is also proposed to be taxed at the hand of the recipient.”
The proposal comes at a time when the purchase of cryptocurrencies and NFTs are quickly making inroads in India despite regulatory uncertainty in the nation.
Binance-owned WazirX said last month that yearly trading volume on its platform exceeded $43 billion in 2021, at an “1,735%” growth from 2020.
The rising popularity of crypto tokens has also led to the emergence of a group of startups looking to innovate in the space. Andreessen Horowitz made its maiden investment in India last year by backing cryptocurrency exchange CoinSwitch Kuber.
“The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” she said.
India’s central bank will also introduce a digital currency in the next financial year, she said. The nation’s central bank has been testing its CBDC through a number of controlled trials for several months in the country and has been examining its impact on the banking and monetary systems.
“Introduction of a central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” she said.
The proposals today have somewhat created more confusion among entrepreneurs, venture capitalists, and the general public alike about how New Delhi plans to tackle cryptocurrencies. By introducing a tax system for crypto-related transactions, New Delhi appears to be either recognizing such virtual assets as a legal tender, or as an investor wondered aloud, “take their pound of flesh from all the action.”
New Delhi also pledged to open up its defense’s research and development to startups, and pushed to increase the reach of internet and digital banks in rural parts of the country.
This is a developing story. More to follow…