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After the speech at the parliament by the FM Nirmala Sitharaman, new rules and regulations regarding Cryptocurrency come into play. The finance minister effectively removed uncertainties and confusion related to the legal status of Crypto transactions.
Read what is crypto tax and all the new tax rules highlighting Cryptocurrency investments. Along with this, the digital rupee has been introduced which is gaining more eyeballs.
What is Crypto Tax?
As the name suggests, it is a tax that is imposed on Cryptocurrency exchange. On 1 Feb 2022, Finance Minister Nirmala Sitharaman introduced the union budget for 2022-23. While reading the budget, she proposed various important details regarding Cryptocurrency. With regard to the budget announcement, experts shared their opinions.
Akshaya Bhargava, Founder & Executive Chairman of Bridgeweave says, ‘Today’s announcement on tax on crypto income is a great move forward by India for 3 reasons- firstly, this move recognizes crypto as a legitimate asset class and crypto trading as a legitimate activity. Secondly, clarity on tax will bring more people into the crypto industry, so it will boost industry growth. Thirdly, a well-regulated crypto eco-system will create the right environment for innovation. That said, I would indeed wish for one change- to be able to carry forward losses into the next tax year. Crypto is inherently volatile and this will help investors’
New Tax Rules and Thing to Know About Cryptocurrency Investments
- While computing income from virtual assets, no deduction will be made on any expenditure except the cost of acquisition. Moreover, any loss while you make the transaction will be set off.
- TDS on payment made while transferring virtual digital assets is kept at the rate of 1% above a monetary threshold.
- The gift of the virtual digital asset will be taxed by the giver
- As per the Finance Bill, a virtual digital asset refers to any code or information, or token that is created using Cryptography. It is a digital representation of value traded, and stored electronically.
- The central bank will introduce digital currency which will be different from Crypto assets. FM Nirmala Sitharaman said the full description of CBDC (Central Bank Digital Currency) will be announced soon.
- Earnings from non-fungible tokens and cryptocurrencies are kept under the highest tax band. Any losses from the sale are offset against other income, thus delivering disincentive to investment and trading in digital assets.
- The decision to impose a 30% tax on any profit from the transaction makes trading less profitable, as per the experts.
- Virtual assets like Crypto will be taxed at 30% along with 1% TDS on transactions. This could be a potential challenge for Indian investors who are entering in Crypto market.
- The announcement on Cryptocurrency will be coupled with the government’s digital currency. Sundara Rajan, a DVS Advisor sees it as a discouraging decision that only benefits high-net-worth individuals.
Finance Minister proposes a Digital Rupee that makes use of Blockchain technology. It will be issued by RBI (Reserve Bank of India). The introduction of CBDC (Central Bank Digital Currency) will provide a boost to the economy thus leading to a cheaper and more efficient currency management system.