India finally catches up with global trend by introducing crypto tax regime!
The Government finally has taken a cautious stand on taxation by announcing flat 30% on income from digital virtual assets or crypto.
The finance minister, Nirmala Sitharaman, while presenting the union budget said that the RBI will launch its digital currency from April 1. The currency, called ‘digital rupee’, will be issued by the Reserve Bank in digital form and will be exchangeable with physical currency. Digital currency will also lead to a more efficient and cheaper currency management system, thus it has been proposed to introduce digital rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23.
Central Bank Digital Currency (CBDC) is a digital or virtual currency, but it is not comparable to the private virtual currencies or cryptocurrency that have flourished over the last decade. Private virtual currencies do not represent any person’s debt or liabilities as there is no issuer. They are not money and certainly not currency. A CBDC could provide households and businesses a suitable electronic form of central bank money with the safety and liquidity that it would demand, give entrepreneurs a platform on which to generate new financial products and services, support faster and cheaper cross-border payments across dominions.
The pros and cons of underlying technologies are yet to be analyzed for large-scale rollout, given the energy consumption constraints reported so far. The next step is to build a thorough CBDC ecosystem, with its operation systems, institutions and rules that coexist with the current currency, through whatever means. The two will coexist for a long time.
As India wants to leverage its fintech startup space and reap the benefits of a digital currency -even as it seems to have decided to recognize CBDC as the only digital currency – it would do well to exercise the same degree of caution while moving forward to roll out a CBDC.
The crypto industry and experts welcomed the 30% tax rule for digital assets income. Not just this, there was no negative impact on prices of most of the popular crypto tokens including Bitcoin, ETH, WRX, SOL, ADA, DOGE, MATIC listed on Indian exchanges.