Decision to ban cryptocurrencies in India still pending: Finance Minister

During the Budget session this year, the Finance Ministry touched upon the very sensitive topic of cryptocurrencies. Finance Minister Nirmala Sitharaman announced a new tax regime for digital assets. Cryptocurrencies, most certainly, fall in this category, along with NFTs. On Friday, Sitharaman confirmed why the govt decided to tax the blockchain-based currency.

In response to a query by Congress party member Chhaya Verma, Sitharaman claimed that government has a sovereign right to tax the assets. A lot of stakeholders in the cryptocurrency ecosystem saw the move as a sign of legitimacy. However, Sitharaman confirmed that the decision to ban or not to ban cryptocurrencies is still pending.

What did the FM say?

In response to Verma’s question about cryptos, FM said, “I am not going to legalise it or ban it at this stage. Banning or not banning will come subsequently, when consultations give me input”.

And regarding the taxation of the relatively new asset class, she said, “Legitimate or illegitimate, it is a different question, but I will tax because it is a sovereign right to tax”.

Details about new Crypto Tax

During the Budget 2022 speech, Nirmala Sitharaman announced that India will be taxing crypto investors. Any income from any ‘Virtual Digital Asset’ class will be taxed at a rate of 30 percent. Cryptocurrencies and NFTs may be the two of the biggest investment options under this label.

Furthermore, there will be no deduction in respect of any expenditure. Neither will there be any allowance while computing income from these assets. If there is any loss from transfer of a virtual digital asset, it cannot be set off against any other income.

If the investor incurs any loss by putting in money in virtual assets, it cannot be offset against other income. However, the capital gains will still be taxed at 30 percent, under the proposed policy.

Additionally, the govt also decided to levy a TDS payment of 1 percent for every transaction made in the crypto asset. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.

FM Sitharaman said, “in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 percent of such consideration above a monetary threshold.”

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