Clarifying that the central government does not plan to levy a tax on the digital currency to be issued by the Reserve Bank of India (RBI), Union Finance Minister Nirmala Sitharaman said on Tuesday that the proposed tax of 30 % would only be taxed on cryptocurrencies that the FM says are assets.
“A currency is only a currency when it is issued by the central bank, even if it is a crypto. Anything outside of that, we loosely call them cryptocurrencies, don’t are not currencies”, underlined the Minister of Finance during the post-budget press conference in New Delhi.
“We do not tax currency that has not yet been issued by the RBI. And what the Reserve Bank issues is digital currency. All that prevails outside, in the name of digital, are assets created by individuals. And, by trading those assets if profits are made, we tax that profit at 30%,” Sitharaman added.
She further stated that the Center also monitors the money trail in crypto transactions and that a 1% TDS will be imposed on every transaction using cryptocurrencies.
The proposed 30% tax on virtual assets will effectively legitimize the trading of private cryptocurrencies and non-fungible tokens. This is broadly in line with the Centre’s plans to have fiat digital currency, while prohibiting the use of private virtual coins as legal tender.
While presenting the union budget, Sitharaman said the digital rupee will be issued by the RBI using blockchain technology from the next fiscal year. The introduction of digital currency by the central bank will lead to cheaper and faster currency management.
However, the finance minister did not mention the proposed cryptocurrency bill for the regulation of private cryptocurrencies in her budget speech.
In response to questions regarding cryptocurrency regulation, Sitharaman said the Center is in talks with public stakeholders to formulate sound regulatory policy. She did, however, mention that the government cannot wait until then to start taxing people who make a profit from trading cryptos.
Indian investors have put around Rs 45,000 crore in private cryptocurrencies. The RBI has opposed private cryptocurrencies, saying they are a serious concern from a macroeconomic and financial stability perspective.