Indian Finance Minister, Nirmala Sitharaman, made a big announcement today. While presenting the budget she announced 30% tax on crypto profits. This a good sign as it clears the position of the Government on crypto assets.
Earlier there was a lot of speculation that India might put a complete ban on the crypto digital assets. The finance minister today said:
There has been a phenomenal increase in transaction in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.
The Indian Finance Minister announced heavy taxes on profits derived from crypto trading, along with it she said that the losses from crypto trading cannot be offset against any other income.
During and after the Lockdown in India, there has been a massive rise of the Indian crypto investing community. The local investors are putting billions of dollars into the market. The crypto market hit record highs last year, the trading activity on local Indian exchanges has also shot up greatly.
As per estimates, currently, there are 15 to 20 million crypto investors in India, Reuters reported earlier. The combined crypto holdings of Indian crypto investors is somewhere around 400 billion INR or $5.37 billion.
Presenting the Union Budget 2022–23, Finance Minister Nirmala Sitharaman also said that the digital rupee will be introduced by the Reserve Bank of India (RBI) in 2022 to boost the Indian economy.
India’s announcement of the Digital Rupee and the introduction of crypto taxes means that investors can freely participate in the crypto market without the fears of an absolute ban. This might lead to further liquidity and participation from Indian investors.
Reaction on this 30% tax on Crypto
However, this 30% tax could be a big obstacle for Indian retail investors. Putting heavy taxes on crypto profits is suggesting that the government does not want to encourage crypto investing among retail players. However, WazirX CEO Nischal Shetty sees it to be another step towards positive crypto regulations.
First the taxation of Crypto assets and second the introduction of Digital Rupee (CBDC) is making the governments stand clear. We might see more clarity on crypto by the Government over next financial year. However, one thing is clear now that Indian government is absolutely willing to recognize the crypto assets.
Hence, we can see more participation from Indian investors this year.
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-from the desk of Wali