Cryptocurrency and Budget 2022 – Everything you need to know

Synopsis

The government has surely come a long way in its stance towards crypto in the last year. Many hope that this positive outlook towards cryptocurrencies will continue to mean good things for cryptocurrencies and their various applications: Web3, dApps, DeFi, and others.

The Government of India announced the Union Budget for 2022–23 earlier today, with Finance Minister Nirmala Sitharaman bringing much-needed clarity for millions of crypto investors in India. The government has imposed a 30% fixed tax rate on all income generated through crypto trading while also aiming to introduce the Digital Rupee in 2022–23.

The Digital Rupee, which is supposed to be India’s first Central Bank Digital Currency (CBDC) project, will be a digital form of the rupee – one that will be completely regulated and monitored by the central government. But if you are unsure what CBDCs mean, CoinSwitch Kuber brings the much-needed clarity on it.

Such currencies usually have the full faith and backing of the issuing authority. Hence, the Reserve Bank of India will remain the guarantor of the Digital Rupee, just as it is for regular notes and coins.
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The Finance Ministry, in these regulations, has proposed a 30% tax on the exchange of all virtual assets, including cryptocurrencies and non-fungible tokens. It has also highlighted that losses on these crypto-assets cannot be offset to a later date. This means that any loss encountered during the trading of these assets will not be set off with other income sources and that it will be carried on to subsequent years.

Gifts in the form of virtual currencies are also liable to be taxed, with the recipient bearing the liability for any such deductions.

Further elaborating on the taxation model for such virtual currencies, the Finance Minister outlined that all crypto transfers above a certain monetary threshold will be liable for a 1% TDS deduction, which will help the authorities keep track of the movement of such currencies in the economy.

Many have seen these moves as a confirmation of the government’s acceptance of digital currencies. Others also say that this move reinforces the government’s stance to disallow private crypto as legal tender while providing citizens with a fiat alternative to the same.

Ashish Singhal, the CEO of CoinSwitch Kuber, one of the biggest crypto platforms in India, has welcomed the government’s decision to introduce such a CBDC in the Indian economy to accelerate digitization.
inside-image (2) Many stakeholders, including CoinSwitch Kuber , have favoured the government’s approach towards cryptocurrencies. “The budget provides clarity on taxation and shows the government’s intent to take a business-friendly approach while protecting the interest of consumers and the exchequer. We hope to work with the government to help bring crypto-asset taxation at par with other asset classes and participate in the central government’s vision to promote economic growth,” tweeted Ashish Singhal.

Ahead of the Budget, many prominent stakeholders demanded more clarity on cryptocurrencies, including regarding their corresponding taxation and GST rules. With these developments, it is clear that the government does not intend to “ban” cryptocurrencies in the near future. Such recognition of virtual assets in the national Budget and the imposition of clear tax rules has certainly made investors optimistic about their investments.

For most crypto investors out there, the introduction of a 30% tax rate is welcome, even if it is higher than other asset classes like stocks or bonds. After record uncertainty about the fate of virtual currencies, the mere fact that cryptocurrencies are here to stay is a relief to many.

The Budget affirms India’s conviction to forge a progressive and technology-driven future. Although this is not the equivalent of giving cryptocurrencies the status of a legal tender, the acceptance of cryptocurrencies is in itself a big move. And leading crypto platforms like CoinSwitch Kuber are more than welcoming of this accommodative stance.

The government has surely come a long way in its stance towards crypto in the last year. Many hope that this positive outlook towards cryptocurrencies will continue to mean good things for cryptocurrencies and their various applications: Web3, dApps, DeFi, and others.

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Updated: 02/01/2022 — 11:00