Bitcoin is legal in India or not, Supreme Court asked the central government to make its stand clear on the cryptocurrencies. The central government is preparing a Bill to regulate cryptocurrency and other digital assets in India. Finance minister Nirmala Sitharaman in Union Budget 2022 announced that the central government will levy a steep tax at 30 per cent on virtual assets including cryptocurrencies and Nonfungible tokens or NFTs. For this crypto tax, Budget 2022 proposed to introduce a new section 115BBH to levy income tax on cryptocurrencies and other virtual assets.
Is Cryptocurrency Legal in India?
Taxing cryptocurrencies does not give them legal status in the country, finance minister Nirmala Sitharaman clarified in the Parliament. It’s the country’s sovereign right to tax cryptocurrency transactions. However, any official stance on regulation will only come once the ongoing consultations are completed, finance minister said.
Crypto Tax: What it Means
“The proposed section 115BBH seeks to provide that where the total income of an assessee includes any income from transfer of any virtual digital asset, the income tax payable shall be the aggregate of the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30 per cent and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of virtual digital asset,” Budget 2022 Memorandum said.
The newly proposed cryptocurrency tax will be applicable from Assessment Year 2023-24. That means all your income from crypto transactions in FY 2022-23 will be taxed at the rate of 30 per cent. Investors have to pay tax according to the existing taxation rules for FY 2021-22.
What are Virtual Digital Assets?
Explaining what would come under the virtual digital assets, Micky Irons, chief marketing officer, DeSpace Protocol said, “In simple words, it basically means cryptocurrencies, DeFi (decentralised finance), and non-fungible tokens (NFTs). Prima facie, this excludes digital gold, central bank digital currency (CBDC) or any other traditional digital assets, and hence aimed at specifically taxing cryptocurrencies.”
Crypto Legality in India: What Experts Say
“As the central government has announced straightaway a 30 per cent tax on any kind of transfer in cryptos, investors are taking it as the first positive step towards crypto regulation in the country. It is now clear from the Budget announcement that there is not going to be any ban on cryptos and this may encourage more investors into the industry than deter them,” Micky Irons said.
“However, more clarity needs to emerge, possibly through circulars, around the manner of taxation for one trading in crypto as stock in trade or exchange. There needs to also be clarity around the cost of acquisition as there may be platform commissions, gas fees and so on that may go into the cost of acquisition,” he added.