Hands-off policy on Crypto Currencies by GOI an interesting stand
Finance Minister Nirmala Sitharaman on Friday told the Parliament that the government at this stage is not going to legalize or ban but will tax those who make profit earned from crypto currency trading. In the present budget, the government has imposed a 30 percent tax on the profit earned from virtual or digital transactions like trading in crypto currencies. She was replying to the Budget debate in Rajya Sabha, clarifying the questions raised by Parliamentarians in this regard. The Finance Minister categorically said the government has sovereign right to tax profit made from crypto currency transactions, and the decision on banning or not banning will be taken based on feedback from consultations.
“I am not going to legalize it or ban it at this stage. Banning or not banning will come subsequently when consultations give me input,” said Nirmala Sitharaman. The Finance Minister’s statement came a day after the Reserve Bank of India Governor Shakti Kanta Das warned the investors in crypto currencies. He said, “Tulips have more value” than Crypto Currencies. He was invoking the 17th century Tulip Mania or Tulip Bubble where many people lost money Tulip flower cultivation.[1]
Replying to questions raised by MPs, the Finance Minister said: “Whether it is legitimate or illegitimate, it is a different question, but I will tax because it is a sovereign right to tax”. She made this assertion while responding to the questions raised by Congress member Chhaya Verma on crypto currency in her speech on the budget. Verma had asked about the legitimacy of taxing crypto currency.
Reserve Bank of India (RBI)-issued ‘Digital Rupee‘ will be recognized as currency, and the government will levy a 30 percent tax on gains made from any other private digital assets from April 1. The Budget 2022-23 has proposed a 1 percent TDS on payments towards virtual currencies beyond Rs.10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS (Tax Deduction at Source) would be Rs.50,000 a year for specified persons, which includes individuals/ HUFs who are required to get their accounts audited under the Income Tax Act. Also, no deduction in respect of any expenditure or allowance shall be allowed while computing income from transactions in such assets.
The new provisions also specified that losses from the transfer of virtual digital assets will not be allowed to be set off against any other income. The provisions related to 1 percent TDS will come into effect from July 1, 2022, while the gains will be taxed effectively from April 1.
Reference:
[1] Warning Indians against cryptocurrencies, RBI chief says tulips have more value – Feb 10, 2022, ToI
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