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Elucidating that the Central government was not planning to levy tax on the digital currency that will be issued by the Reserve Bank of India (RBI), Union Finance Minister Nirmala Sitharaman Tuesday stated that the proposed 30 per cent tax will be imposed only on cryptocurrencies which, according to the FM, are assets.
“A currency is a currency only when it is issued by the central bank, even if it is a crypto. Anything outside of that, loosely we refer to them as cryptocurrencies, are not currencies,” the Finance Minister pointed out during the post-Budget press conference in New Delhi.
“We are not taxing the currency that is yet to be issued by the RBI. And what Reserve Bank issues is the digital currency. Everything that prevails outside of it, in the name of digital whatever, are assets being created by individuals. And, in transacting those assets if profits are being made, we are taxing that profit at 30 per cent,” Sitharaman added.
She further stated that the Centre was also monitoring the money trail in crypto deals and that a 1 per cent TDS will be imposed on every transaction using cryptocurrencies.
The proposed 30 per cent tax on virtual assets will effectively legitimise trading of private cryptocurrencies and non-fungible tokens. This is broadly in line with the Centre’s plans to have a fiat digital currency, while disallowing use of private virtual coins as legal tender.
While presenting the Union Budget, Sitharaman said the Digital Rupee will be issued by the RBI using blockchain technology starting from the next financial year. The introduction of digital currency by the central bank will lead to cheaper and faster currency management.
However, the Finance Minister did not mention about the Cryptocurrency Bill for the regulation of private cryptocurrencies in her Budget speech.
In response to queries regarding the regulation of cryptocurrencies, Sitharaman stated that the Centre was in talks with public stakeholders to formulate a strong regulatory policy. She, however, mentioned that the government can’t wait until then to start taxing those individuals earning profits through the transaction of cryptos.
Indian investors have put around Rs 45,000 crore in private cryptocurrencies. The RBI has been against private cryptocurrencies, saying they are a serious concern from a macroeconomic and financial stability standpoint.
