New Delhi: Speculations have been going for quite a while whether the usage of the world’s largest cryptocurrency, Bitcoin in India is legal or not. For clarification, Supreme Court has asked the central government to stand clear on cryptocurrencies. The central government is preparing a Bill to regulate cryptos and other digital assets in India.
Finance Minister, Nirmala Sitharaman in Union Budget 2022 stated that the central government will charge a 30% tax on virtual assets including cryptocurrencies and NFTs (Non-fungible tokens). Budget 2022, for his crypto tax planned to introduce a new section 115BBH to levy income tax on cryptocurrencies and other virtual assets.
Is cryptocurrency legal in India?
Though cryptocurrencies are taxed, it does not give them the liberty to be legal in the country, stated Nirmala Sitharaman in Parliament. It is the country’s sovereign right to tax cryptocurrency transactions. However, an official step in regulation will come into action after the completion of the ongoing consultations, said the finance minister.
What does crypto tax mean?
According to Budget 2022 Memorandum, “The proposed section 115BBH seeks to provide that where the total income of an assessee includes any income from transfer of any virtual digital asset, the income tax payable shall be the aggregate of the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30 per cent and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of virtual digital asset.”
The newly proposed cryptocurrency tax will be applicable from Assessment Year 2023-24. This suggests that all the income from crypto transactions in FY 2022-23 will be taxed at the rate of 30%. Besides, investors have to pay tax as per the existing taxation rules for FY 2021-22.
What are Virtual Digital Assets?
Micky Irons, chief marketing officer of DeSpace Protocol explaining what would come under virtual digital assets said, “In simple words, it basically means cryptocurrencies, DeFi (decentralised finance), and non-fungible tokens (NFTs). Prima facie, this excludes digital gold, central bank digital currency (CBDC) or any other traditional digital assets, and hence aimed at specifically taxing cryptocurrencies.”
Experts’ opinion about crypto legality in India
“As the central government has announced straightaway a 30 per cent tax on any kind of transfer in cryptos, investors are taking it as the first positive step towards crypto regulation in the country. It is now clear from the Budget announcement that there is not going to be any ban on cryptos and this may encourage more investors into the industry than deter them,” Micky Irons said.
“However, more clarity needs to emerge, possibly through circulars, around the manner of taxation for one trading in crypto as stock in trade or exchange. There needs to also be clarity around the cost of acquisition as there may be platform commissions, gas fees and so on that may go into the cost of acquisition,” he added.