Friday, February 4, 2022

Crypto Update @ Union Budget 2022


India’s crypto industry rejoiced when finance minister Nirmala Sitharaman announced tax rules for virtual currencies in her budget speech on Tuesday. But they quickly learned that recognition doesn’t equal legitimacy, which only the long-awaited cryptocurrency bill could bring.

"Taxing does not automatically bring legitimacy," the finance minister said during a media interaction after her budget speech.

Here’s  crisp about crypto:

o   A 30% tax on income from crypto assets.

o   Losses can not be set off against any other income.

o   1% TDS on all crypto transactions above a certain threshold.

o   Gift taxes, if any, will be the liability of the recipient.

o   RBI-backed ‘digital rupee’ to be launched in FY23.

That said, this was the first time the budget explicitly defined “virtual digital assets”. Non fungible tokens (NFTs), which we have written about extensively, also got a mention. The industry has come a long way from just a few years ago when it was facing down a proposal to imprison anyone holding cryptocurrency for up to 10 years.

        The government has defined “virtual digital asset” to mean any information, code, number or token, generated through cryptographic means or otherwise, that provides a digital representation of value, or functions as a store of value or a unit of account, and can be transferred, stored or traded electronically.

What’s still unclear: Here’s what we still don’t know, among other things.

o Whether gains from one crypto can be offset against losses from another.

o Rules around transferring crypto to exchanges or private wallets registered in another country.

o   Whether traders can hold crypto as stock in trade.

o   How crypto-to-crypto trades will be treated.