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India to launch Digital Rupee and set a tax on crypto by 2022-23

India’s Finance minister Nirmala Sitharaman announced the launch of a central bank digital currency (CBDC) for the fiscal year 2022 to 2023. This will pave the way for the Indian government to impose a crypto tax and boost India’s digital economy.

During her speech for 2022’s Union Budget, Sitharaman pointed out the need for digital inclusion in various businesses and announced the current fund allocation. According to the finance minister, the launch of the digital rupee will create the possibility of a more efficient and cheaper currency management system.

‘It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23’, Sitharaman stated.

Furthermore, to complement the launch of the digital rupee, Sitharaman proposed to impose a 30% crypto tax for all kinds of virtual digital asset transactions. 

‘Any income from transfer of any virtual digital asset shall be taxed at the rate of 30%. No deductions in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition,’ she said.

The finance minister further discussed that any losses or crypto hacking incidents while transacting digital assets cannot be used as compensation for other income sources and to offset taxation on profits.

Sitharaman also proposed to implement a tax deduction at source (TDS) of 1% and above to keep track of crypto investments within India. The Reserve Bank of India has been trying its CBDC for a few months already and are constantly looking into the impact of digital assets on the banking and monetary system.

There are no other laws on the books regarding the trading of virtual assets aside from the proposed ban last year. The government is also yet to introduce ‘The Cryptocurrency and Regulation of Official Digital Currency Bill’ which was listed in the winter session of the Parliament. This bill proposes a facilitative framework for the creation of India’s official digital currency.

On another note, Avinash Shekhar, Chief executive of the crypto exchange ZebPay said that tax on digital assets gives the entire ecosystem of crypto transparency on the road ahead. He further added that this will pave the way for a new era of growth and innovation in India.

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