In terms of regulations, India has had an “all-or-nothing” attitude when it comes to cryptocurrencies – it can either accept or reject them completely. In all honesty, India has been giving mixed signals — while the government has leaned towards probable acceptance, country’s central bank, the RBI, is clearly not open to that idea.
Now, Finance Minister Nirmala Sitharaman proposed taxing all digital assets at a rate of 30%. In other words, the tax of 30% will be applicable on any income from the transfer of digital assets, including cryptocurrencies, NFTs, and more. No exemptions or deductions except the cost of acquisition will be allowed, and no loss in the transaction will be allowed to be carried forward.
The Finance Act defines digital assets as “any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically.”
One can earn money by mining, farming, and trading digital assets. This is the first guideline in India that is set to regulate the trading of digital assets that does not outright ban them or allow cryptocurrencies as assets. It also seems that the government is indirectly discouraging dealing in digital assets.
Harish Prasad, Head of Banking, India, FIS, said, “The position of the government is clearly to minimize the attractiveness of crypto-assets, and this is evident from the highest slab tax rate of 30% applicable on all gains and lack of any facility to set off losses from transfers.”
If that is not all, there will also be a TDS (tax deducted at income) of 1% on transactions in the crypto world that are above a specified monetary threshold. So for every transfer of digital assets above the threshold, there will be a tax deduction of 1%.
These will be effective from April 1, 2023.
Another factor that is set to make the journey of cryptos into India harder is the new digital currency of the country, also introduced in Budget 2022. The RBI will be introducing a digital rupee using blockchain technology, which is expected to boost the digital economy.