Can India Sustain 30% Crypto Tax? The Govt Unleashes Taxation in Union Budget 2022

The Union Budget 2022 has imposed a 30% crypto tax on the trading of cryptocurrencies in India

The Union Budget 2022 has announced a 30% crypto tax on income from cryptocurrency assets and 1% TDS on transfer. Crypto investors were expecting some clarity from the Union Budget on cryptocurrency or the crypto tax. The Finance Minister of India, Nirmala Sitharaman, has announced the crypto tax in India— no set-off will be allowed on the loss from the transfer of virtual digital assets against other gains. There will be tax in the hands of the recipient on the gifts in virtual digital assets. The magnitude and frequency of cryptocurrency transactions have made it imperative to impose a specific cryptocurrency taxation regime in 2022.

Crypto investors are relieved after gaining the clarity on crypto tax that was long due for this year. The Government of India also announced the launching of its own blockchain and RBI-backed digital currency known as Central Bank Digital Currency (CBDC) by 2023. Meanwhile, Indian crypto investors also did not receive any extra information about cryptocurrency and blockchain. They are not expecting the introduction of the Cryptocurrency Regulation Bill in Parliament during the Union Budget 2022.

Jay Hao, CEO of OKX.com, the world's second-largest crypto exchange appreciates the imposition of the crypto tax. "If we look at the global scenario, central banks around the globe have already launched or are about to launch their digital currency. India is slightly lagging in the digital currency race mainly due to the regulatory hurdles and reluctance in accepting the growing popularity of digital assets/digital currency around the world," he said. In accordance with the government-backed cryptocurrency, Jay added:"I hope the announcement made by Finance Minister regarding CBDC is implemented without any further delay as it will give a much-needed push to the blockchain industry in India. The taxation of profit from crypto assets at 30% may not receive equal appreciation from all the stakeholders. The higher taxes may discourage investors from choosing crypto as an investment avenue and delay the mass adoption of crypto assets in India.CBDC a boon for blockchain adoption in India."

Shivam Thakral, CEO of BuyUcoin, a homegrown cryptocurrency exchange said, "The crypto industry in India got its booster dose from the regulators which were pending for a long time. We are delighted to see some concrete discussion around crypto in the Union budget by the honorable Finance Minister. The most significant development is the 30% tax on the income from the transfer of digital assets, which clearly shows the government's inclination towards legalizing crypto in India. The cost of acquisition of crypto assets to be allowed as a deduction is expected to drive mass adoption of crypto and boost investor confidence. The 30% tax structure was always there within the crypto ecosystem in India but a formal announcement by the finance minister will further strengthen its implementation. The 1% TDS is new for the industry and we will have to wait for finer details to gauge its effect on crypto trading in India. The crypto investors in India must be extremely satisfied with this announcement as they can now execute crypto trading without any fear. The positive move by the regulators will legalize the billions of dollars invested by Indians in crypto-assets and create a new tax revenue stream for the government."

While talking about the CDBC, he opined, "RBI has always been ambitious with its CBDC launch. The launch of CBDC by RBI will catalyze the growth of blockchain infrastructure in India and will encourage more entrepreneurs to join the blockchain revolution. If RBI allows the trading of CBDC on private exchanges, it will add a new dimension to public-private partnerships in India's fintech space. The launch of RBI's CBDC will prove to be a momentous occasion for the digital asset industry as it will create a government-approved market for the launch of new/existing digital assets."

Edul Patel, CEO, and Co-Founder, Mudrex, a global crypto investing platform mentioned, "The Finance Minister, Nirmala Sitharaman, has suggested 30% taxation on crypto gains. The losses if any cannot be offset against other income. Additionally, the introduction of TDS on crypto transfers can now monitor crypto transactions. On the sale of digital assets, 1% TDS would be applicable. Besides taxation on digital assets, India will soon have its blockchain power digital rupee. The digital asset classification will consist of crypto, NFT, and government-issued currencies. It is undoubtedly a progressive step towards boosting crypto adoption in the coming years."

The concern is whether India can sustain this cryptocurrency tax of 30% or will there be any modification. There are multiple financial stability issues in the Union Budget on cryptocurrency for Indian crypto investors. Different levels of crypto investors earn revenue from cryptocurrencies in India through different types of income. Indian crypto investors are expecting more clarity on the crypto tax for crypto exchanges such as GST implications and many more.

It is a country-wide concern whether the Government of India will focus more on the CBDC and less on popular cryptocurrencies such as Bitcoin, Ethereum, Cardano, Avalanche, and hundreds more. Meanwhile, this is the first progressive step towards rules and regulations on cryptocurrency taxation in 2022 will take effect from April 1, 2023, in relation to the assessment year 2023-2024. Thus, trading cryptocurrencies is officially and legally allowed in India through its 30% crypto tax.

But, Indian crypto investors must be careful of one point of this Union Budget 2022— one should trade cryptocurrencies that are being notified by the Central Government. The Government of India will notify the names of cryptocurrencies after a short period of time. Here are some of the reactions from eminent crypto leaders and CEOs of popular cryptocurrency companies in India.