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India has decided to levy the top rate of 30 percent tax on income arising out of transfer of digital assets, in a move that effectively makes trading in cryptocurrency legal.
To bring such assets into the tax net, Finance Minister Nirmala Sitharaman also proposed in her budget speech on Tuesday, a 1 percent tax deduction at source on transactions related to purchase of virtual assets.
“There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” she said.
The proposal rules out setting-off losses on the transfer of digital assets against any other income. Plus, gift of virtual assets will be taxed in the hands of the recipient.
The announcement ends months of speculations around the introduction of an official digital currency of India.
Binance, the world's largest cryptocurrency exchange, welcomed the move in a tweet that said: “Crypto just became legal in India! The Indian government has cleared confusions in the form of a crypto asset tax law.”
Elsewhere in the same speech, the Indian minister said the Reserve Bank of India, the country's central bank, will introduce a digital currency in the 2023 using blockchain and other supporting technology.
"Digital currency will also lead to 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 said.
(Reporting by Brinda Darasha; editing by Seban Scaria)
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