The Indian government officially made cryptocurrencies legal in India. However, as India plays catch up with other countries when it comes to virtual currencies and digital assets, the government has implemented stringent new regulations for them as well.
1% TDS by the seller on the transaction: pic.twitter.com/rJVEEtzH6c
— Deepak Shenoy (@deepakshenoy) February 1, 2022
The news about these regulations arrived during the 2022 Union Budget proceedings, which took place today. Along with a slew of financial changes introduced by the Indian government, Union Finance Minister Nirmala Sitharaman also announced taxes on digital asset transfers.
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As part of the Union Budget 2022, Sitharaman proposed in her speech:
- Any income from the transfer of virtual digital assets will be taxed at 30%.
- No deductions and exemptions will be allowed while computing the income.
- There will be a 1% tax deduction at source (TDS) on the payments made for the transfer as well.
Along with that, Sitharaman also announced that India will also adopt its own digital currency, which will be implemented by the Reserve Bank of India (RBI).
Digital currency will be issued by the RBI in 2022-23. Digital rupee will give a big boost to the economy: FM @nsitharaman #AatmaNirbharBharatKaBudget। #BudgetWithAIR pic.twitter.com/yCK9OjtXix
— All India Radio News (@airnewsalerts) February 1, 2022
It’s interesting to see India fully adopt cryptocurrency when it was speculated that the government might look to prohibit them altogether.
However, even though NFTs and digital assets have officially become legal in India, the adoption has come with huge costs as crypto holders will be taxed 30% on the profits they earn from any sale.
This regulation has come at a time when many cryptocurrencies have seen a massive dip in value following the recent crash, with many wondering if this would continue.
India’ cryptocurrency tax is also on the highest tax band at 30%, which could steer people from joining the trade of digital assets.
As India is one of the fastest growing cryptocurrency markets, most traders would be dejected to see these strict regulations. However, at the same time, the tax will help prevent any financial instabilities that can be caused by an unregulated crypto market.
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