Move to tax crypto significant, says Kshitij Purohit on Union Budget 2022

Finance Minister Nirmala Sitharaman’s announcement on taxing digital asset transfers at a 30% rate has triggered conversations on whether the Indian government is planning to legalize cryptocurrency.

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The legal status of cryptocurrency in India has been in question for a while. While the Reserve Bank of India (RBI) has expressed its reservations about cryptocurrency on account of its volatility, a Bill on cryptocurrencies — Cryptocurrency and Regulation of Official Digital Currency Bill — is awaiting discussion in Parliament.

The Finance Minister presented the Union Budget 2022 in Parliament on Tuesday. A TDS of 1% will be levied for cryptocurrency transactions above a certain threshold. Recipients will be taxed in case of gift of virtual digital assets.

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Commenting on the decisions, Kshitij Purohit, Lead, Commodities and Currencies, CapitalVia Global Research Limited, said that the Finance Minister’s move to tax 30% of income from the transfer of virtual digital assets is a significant move that has brought cryptocurrencies and non-fungible tokens (NFTs) into the tax net.

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“Finance Minister Nirmala Sitharaman announced a 30% tax on any income from the transfer of virtual digital assets on Tuesday, specifying that no deductions or exemptions will be allowed. This is a significant move that is thought to have brought cryptocurrencies and non-fungible tokens (NFTs) into the tax net. The gift will be taxed in the recipient’s hands, she added, stating that payments for the transfer of digital assets will be subject to a 1% tax deducted at source (TDS). It was also stated that any loss incurred in the transaction of such digital assets may not be offset by any other gain.

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“Once enacted, cross-border insolvency rules will allow lenders to recover debts from defaulting borrowers who dispose of foreign assets as well as promoters’ personal assets parked in offshore locations. The new IBC rules governing cross-border insolvency will be broadly based on the United Nations Commission on International Trade Law (Uncitral).”

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“The FY22 divestment target has been reduced from Rs 1.75 trillion to Rs 78,000 crore, and the disinvestment target for next year has been set at a conservative Rs 65,000 crore. In her budget speech, Finance Minister Nirmala Sitharaman stated that the public issue of LIC is expected shortly, and others are also in the process for 2022-23″ he noted.

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The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, was listed for introduction in the Lok Sabha in the earlier winter session but did not come through.