India’s Finance Minister unveils the Union Budget 2022 to tax crypto

India has included a crypto tax in its Union Budget 2022. The cryptocurrency market in India remains highly unregulated. However, this tax will now introduce some form of clarity in the Indian cryptocurrency market.

India’s Finance Minister, Nirmala Sitharaman, has proposed a 30% tax on the income generated from the transfer of digital assets. Sitharaman stated that only the cost of acquisition will be allowed.

India’s crypto tax

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Part of the proposed tax said,

The income tax payable shall be the aggregate of the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30% and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of virtual digital asset.

While this tax law is clear, transparency is yet to be established, as crypto assets given as gifts have not been given a definitive tax requirement. In addition to the tax, the government also wants to monitor crypto transactions closely.

Nischal Shetty, the CEO of WazirX, one of the leading cryptocurrency exchanges in India, has welcomed this tax regime. Shetty noted that this tax clarity was a “welcome move” as it could legitimize the crypto sector and allow more people and corporates to participate in crypto.

Despite the optimism, a 30% income tax still appears like a huge amount. However, the benefits of this law outweigh the costs, with many believing that it will bring crypto to India’s mainstream market. Moreover, it also shows that the legalization of crypto in India could be on the way.

India planning to launch a CBDC

Sitharaman has previously talked about launching a central bank digital currency (CBDC). This CBDC will allow India to have its sovereign digital currency, preventing the use of private cryptocurrencies as legal tender.

India will be joining countries such as China that are advancing with their CBDC plans. A digital Indian rupee will bring efficiency and speed to crypto transactions. CBDCs are digital currencies controlled by governments and are safer, and values are usually pegged on fiat currencies.