Budget 2022: As FM introduces 30per tax on virtual currency, does it indicate future of cryptocurrencies in India?
Categories: Crypto News
In her Budget speech on Tuesday, Finance Minister Nirmala Sitharaman said, "There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent." The decision to tax digital assets came as a major setback for the existing crypto investors in the next financial year and might discourage investments in cryptocurrencies. A cryptocurrency is a virtual or digital money that takes the form of tokens or coins. The 'crypto' in cryptocurrencies refers to complicated cryptography that allows for the creation and processing of digital currencies and their transactions across decentralised systems."This is a matter of some debate, both inside the government, in the Ministry of Finance, and even in the Parliament. Since there are some financial stability issues and concerns, a balanced view on this will be taken ultimately," he said. It must be noted that the Reserve Bank of India (RBI) has voiced "serious concerns" around private cryptocurrencies on the grounds that these may cause financial instability.The Central Bank Digital Currency (CBDC) is a digital form of fiat currency that can be transacted using wallets backed by the blockchain and is regulated by the central bank. CBDC is different from decentralised virtual currencies and crypto assets, which are not issued by the state and lack the 'legal tender' status. It enables the user to conduct both domestic and cross-border transactions which do not require a third party or a bank. India would roll out its digital currency in the next financial year. However, in October 2021, Nigeria launched eNaira, which is a non-interest-yielding CBDC. Bahamas and five other islands in the East Caribbean have already introduced CBDCs.