Union Budget 2022: India Introduces Cryptocurrency Tax

Last Updated on February 1, 2022 by Anu Joy

Finance Minister Nirmala Sitharaman announced a 30 percent tax on any income generated from transfer of virtual digital assets. In her budget speech today, she informed that there will be no deductions and exemptions for transactions involving virtual assets. Read on to know what the Union Budget for the current year has in store for crypto investors in India.

India Introduces 30 Percent Tax on Cryptocurrency Payments

Making a key decision for all crypto investors in India, Finance Minister Nirmala Sitharaman proposed a tax deduction at source on all payments involving cryptocurrencies. She said that gifts in the form of virtual digital assets will also be taxed on the side of the recipient and there will be additional one percent TDS (tax deducted at source) on the payments made for the transfer of digital assets.

While presenting the Union Budget 2022-2023, Nirmala Sitharaman said,

There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions are made it imperative to provide for a specified tax regime accordingly, for the taxation of virtual digital assets, I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 percent.

She added that “no deduction in respect of any expenditure or elements shall be allowed while computing such income except the cost of acquisition for loss from the transfer of virtual digital assets cannot be set off against any other income”.

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The news appears to be not so encouraging for investors looking forward to diversifying their financial portfolio. The Finance Minister did not provide any clear insights on crypto exchanges, including GST implications.

“In order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer virtual digital assets at a rate of one percent of such considerations about a monetary threshold gift the virtual digital asset is also proposed to be taxed in the hands of the recipient,” the finance minister added further.

During her speech, Sitharaman informed that the Reserve Bank of India will also introduce digital currency in the coming financial year. The Central Bank of India has been planning on initiating its Central Bank Digital Currency (CBDC) for several months.

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

What are your thoughts on this year’s Union Budget and taxing cryptocurrency payments in India? Let us know in the comments section below.