Government sees it as a potential revenue source and hence the decision is to tax profits in budget speech even in the absense of a law on it
Union Budget 2022-23 is being dubbed as a budget for growth. It came without much fanfare and noises and was one surely without screaming headlines. While, expectations of the middle class – which has been braving the pandemic since its onset in March 2020 – were riding high on this budget and no significant announceents were made, the silver lining is that no adverse announcements were made to increase their woes any further. However, one thing that has become the talk of the town is the announcements on digital assets or crytocurrency.
The Finance Minister in her Budget Speech announced introduction of tax regime for digital assets in India. In her fourth budget, also the third full budget, Sitharaman said that any income from transfer of any virtual digital asset will be taxed at the rate of 30 per cent.
There will be no deduction in respect of any expenditure or allowance to be allowed while computing such income except cost of acquisition. To capture the transaction details, TDS (Tax Deducted at Source) to be provided on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. The governmet will also be taxing the recepients of virtual digital asset who get it as gifts.
Moreover, the loss from transfer of virtual digital asset cannot be set off against any other income.
In the post budget press conference, the minister also cleared the government’s intention to tax digital assets that are being created by individuals and profits are being made by them while trasacting these assets. She said that the Government would not wait for the regulations to come in place for taxing assets from which profits were being made by the investors.
At least, this will allow investors to have a starting point and make informed choices in terms of gains or losses associated with this asset class.
While the question of legality still lingers, investors in this asset class are now clear on what they must pay as taxes to the government. Many in the industry have welcomed the move and call this as a starting point even if it means taxation of this asset class. Indiviual investors might feel the pinch of 30 per cent levy, but some certainty to begin with, is okay.
It is also now clear that the government sees this as a strong revenue source and it is highly unlikely that it will let it go. So, it can be safely assumed that investors who have already bought cryptos will not have to spend sleepless night thinking of it getting banned. This means that even in the absense of a law on cryptocurrency or digital assets, the investors could be rest assured that the cryptocurrency is there to stay.
The government has also clearly spelt out the distinction between a digital currency and cryptocurrency and said that people must not confuse one with the other. Digital currency will have a sovereign backing and be issued by the Reserve Bank of India (RBI).
The RBI will be issuing Central Bank Digital Currency (CBDC) in FY23 which will be in the form Digital Rupee. It will be supported by blockchain and other technologies. Its form and details will be known later the FM had said. The digital currency will be lie any other paper currency and is being seen as yet another step towards Digital India.
The Digital Rupee is expected to improve efficiencies, will have a trail and hence illegal hoarding could not be done. It will also stop counterfieting of currency and could check terror funding. It cannot be damaged and people will be able to transact with it even outside India.
It is also expected to save a lot printing and logistic cost.However, Digital rupee will have its own costs including hardware, softwares, technology, maintenance and manpower. People with altogether different skill-sets will be needed to operate it.
Meanwhile, crypto will be digitall asset and will not be a legal tender like the Digital Rupee.
The Finance Minister in her post budget press conference had also said that the consultations on cryto or digital assets were on and any further information on it would be made available in due course.
The smartphones have lent a lot of prowess in the hand of a common man and the penetration has only been improving significantly across the length and breadth of the country especially the urban parts. Continuous innovations have only simplified things even for a lot of technologically challenged people.
Digital Rupee and digital assets are also expected to see the rush ones they are laws in place.
So, there is a beginnng and the anticipation is only building up.