Finance Minister Nirmala Sitharaman is presenting the Union Budget 2022 in Parliament Tuesday. The finance minister on Tuesday said income from the transfer of digital assets is to be taxed at 30%. A TDS of 1% will be levied for transactions above a certain threshold. Recipient to be taxed in case of gift of the virtual digital asset.

Gifts in crypto and digital assets will also be taxed, she said. The tax proposals will come into effect from April 1 after the passage of the Union Budget in Parliament.

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Digital Rupee is proposed to be introduced by RBI using blockchain technology starting from 2022-23, Finance Minister Nirmala Sitharaman said on Tuesday.

In her Union Budget 2022-23 speech, she also said Rs 1 lakh crore financial assistance to states will be provided in 2022-23 to catalyse investments.

The finance minister further said that in 2022-23, states will be allowed a fiscal deficit of up to 4 pc of GSDP.

The announcement of a heavy tax on crypto income comes as a big disappointment for crypto investors. The Finance Minister also said that by 2023, a Blockchain-based and RBI-backed Central Bank Digital Currency (CBDC) will be introduced.

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Commenting on the announcement, Sundara Rajan TK, Partner at DVS Advisors LLP, said: “The clarity on the tax of digital assets is long overdue and was expected to be provided this year. The announcement of tax @ 30% on the digital asset, coupled with the government launching its own digital currency, is an indication that the government intends to discourage the same and would intend that only the HNIs make such investments and that the government shall not permit cryptos as currency.”

Ahead of the Budget, Cryptocurrency experts and investors were expecting clarity on the taxation of gains from crypto assets in Budget 2022. Some experts believed that Finance Minister Nirmala Sitharaman may not touch upon the cryptocurrency issue directly in her Budget Speech 2022. However, some announcements related to crypto tax were expected to be made by the Finance Minister.