Crypto Coming to India with Digital Rupee, 30% Tax

In a budget speech on Tuesday (Feb. 1) India’s Finance Minister Nirmala Sitharaman announced that the transfer of digital assets would be allowed, with income from those transactions taxed at 30 percent. She also indicated that the country’s central bank will launch a digital currency.

“It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23,” Sitharaman said, according to multiple media reports.

“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,” Sitharaman said.

The finance minister also said that losses from transacting in digital assets can’t be used to offset profits.

See also: RBI Supports a Full Ban on Cryptocurrencies in India

Sitharaman said the 30% tax all but cements the legal status of digital asset trading. There are currently no laws on the books that regulate trading in virtual assets, aside from the proposed ban last year. The lack of legislation didn’t stifle the country’s enthusiasm or demand for digital assets, with a 641% escalation from January through June of last year, according to data from Chainalysis.

The subject of cryptocurrencies in the world’s sixth-largest economy has seesawed between a full ban and the release of its own CBDC, with the most recent move prior to Tuesday’s budget speech largely being a wait-and-see approach, pending policy outcomes on the world stage.

Read more: India’s Prime Minister Calls for Global Action on Crypto

The Reserve Bank of India has been trialing its CBDC for several months and looking into a digital coin’s impact on the banking and monetary systems.

“Introduction of a central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” Sitharaman said.