The Budget goes Digital in 2022
There is one thing that the Indian working-class and business-class look forward to every year – The Budget. But the impending regulations on cryptocurrency have grasped the attention of the young and tech-savvy as well. With the immense rise of these digital currencies and assets, as well as their expansion and boom in regional markets, it is clear that the Indian government can no longer afford to take a passive stand on this phenomenon.
So what did Finance Minister Sitharaman have to say about crypto taxation and regulation in the Union Budget 2022?
What does the Union Budget 2022 say about Crypto?
First off, the list of legislations that have been proposed to be brought on the floor of the house does not include the Crypto Regulation Bill. The lack of a bill should not be seen as disinterest or nonchalance by the government towards the crypto world. It could possibly be due to factors that are ever-evolving. The Parliamentary committee is still said to be in talks with the Ministry of Finance and other stakeholders before it tables a comprehensive bill on cryptocurrency.
Taxation of Virtual digital assets
Secondly, although there is no bill on the regulation of crypto mining and trading, the Government has made a move on its taxation. This long-overdue move is now the first-ever formal step taken by the Government towards acknowledging and legitimizing the world of cryptocurrency. The Budget proposed that any transfer of a cryptocurrency, or a virtual digital asset, will be taxed at a flat rate of 30%.‘Virtual digital asset’ includes NFTs and any information or code or number generated through cryptographic means.
The rate is irrespective of the holding time, short or long. This sets it apart from the equity market and makes it similar to the tax on prizes and lotteries. The only deduction that will be allowed is the cost of acquisition. Loss in a transaction will not be allowed to be carried forward. Taxes on gifts of virtual assets will be borne by the recipient. Furthermore, a TDS on virtual digital assets of 1% has also been proposed to prevent crypto traders from escaping the tax net.
The 30% tax rate is high for a middle-income investor. The only people who would stand to gain from such transactions would be High Networth Individuals. In that sense, the movie seems biased. It might have been done to discourage the predominant middle-class from investing in highly fluctuating and unpredictable markets.
The Rupee goes Digital
Thirdly, the FM mentioned that a blockchain-based and RBI-backed Central Bank Digital Currency will be introduced by 2023. Industry insiders claim that the government is waiting for this launch to happen before they bring about the Crypto Regulation Bill.
The Government has come a long way from last year when there was a high-level skepticism of anything crypto-related. The imposition of tax and the pending introduction of the Central digital currency shows that the government is now starting to warm up to the idea of crypto. What remains to be seen is when the regulation bill will be introduced and which regulatory body will be made responsible.