Government to Ban Cryptocurrency or Not; FM Sitharaman Replies

During the Budget session of Parliament on Friday, Finance Minister Nirmala Sitharaman stated that the government has the sovereign right to tax profits derived from cryptocurrency transactions, and that the decision to prohibit or not ban cryptocurrencies in India will be made after consultations.

She also explained the laws of bitcoin in India, stating that taxing virtual assets does not imply that the government has legalized them. “At this moment, we are not doing anything to legalize or outlaw it,” Sitharaman said in response to a question in the Rajya Sabha about the decision to collect a 30% tax on income from virtual assets.

The FM indicated during her Budget speech that gains from virtual digital assets will be taxed at a flat rate of 30%, regardless of the individual’s income tax slab rate. Furthermore, on transfers of such assets exceeding a specific level, a 1% tax deducted at source (TDS) will be applied.

Furthermore, when calculating income from transactions in such assets, no deduction for any expense or allowance shall be granted. It has also said that losses incurred in the transfer of virtual digital assets would not be allowed to be deducted from other earnings.

Sitharaman has advocated that the Reserve Bank of India (RBI) release Digital currency or Digital Rupee beginning in 2022-23, based on blockchain and other technologies. According to her, the introduction of Central Bank Digital Currency (CBDC) will give a significant boost to the digital economy, resulting in a more efficient and cost-effective currency management system.

“A digital currency will be issued by the RBI. Everything that exists outside of it is made up of assets created by individuals, and we tax profits made from the transactions of those assets at a rate of 30 percent,” said FM Sitharaman in a press conference after the Budget on February 1. Only the RBI-issued ‘Digital Rupee’ will be recognized as digital currency, she noted.