Instead of a ban, India now wants to tax crypto at 30% and make it legal tender
The hackers who tweeted that India has accepted Bitcoin as official currency from Prime Minister Narendra Modi's account may have been on to something, after all. India swung from proposing an outright ban on crypto transactions to now entertaining the thought of taxing digital asset income with a 30% cut and issuing its own digital rupee. The finance minister Nirmala Sitharaman's proposal has now left analysts wonder whether this is a precursor to making cryptocurrencies legal tender in the country.
Introduction of a central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system
The central bank digital currency (CBDC) has been in test runs since last summer and now the Ministry of Finance informs that the virtual rupee will be launched as soon as the government's next fiscal year. This will, of course, legitimize digital transactions on account the scope of regulation and impact assessments needed to launch a national crypto coin and accept it as legal tender.
As far as crypto taxation goes, the proposed 30% levy seems on the high end and the government has even created a system of transaction reporting incentives such as allowing tax deduction at the source.
No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of digital asset cannot be set off against any other income. Gift of virtual digital asset is also proposed to be taxed at the hand of the recipient... The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.
The Finance Minister, however, clarified that they are "collecting inputs for regulation... but I can't wait till regulation comes in for taxing people who are making profits." A 30% crypto and NFT tax will most likely force many transactions to be executed on peer-to-peer platforms, think analysts, instead of withdrawing crypto from the government banks.
???? This is why I used the present continuous tense, namely "India is legalizing."— Balaji Srinivasan (@balajis) February 1, 2022
Yes, on the present path the provisions only go live in April 2023.
But it's highly unlikely that they are going to veer backwards from this announcement towards a ban. https://t.co/4exYAjmkC2 pic.twitter.com/pKld0l5qZJ