Union Budget 2022: Crypto gets an entry with 30% Tax in India!

The crypto industry was awaiting new beginnings in India with the Union Budget 2022 by Nirmala Sitharaman, the Finance minister of India. According to a Decentralized exchange development company, cryptocurrency in India is going to be taxed and will come under cryptocurrency taxation.  It is clearly mentioned in the budget that there will now be 1% tax deducted at source (TDS) on payments for the transfer of cryptocurrencies.

How will crypto taxation work in India?

There has been a buzz in the air with the announcement of the budget by the finance minister of India. The new budget gives a clear sign that the government wants to move ahead with Crypto trading and there is more in store for this popular class asset. This new budget proposes to put a 30% tax on virtual assets. The Central Government of India is also planning to bring in a fiat digital currency but has forbidden the use of virtual coins as legal tender.

Key Takeaways of Budget 2022 –

·         No crypto bill

·         Crypto income to be taxed at 30% for every transfer gain

·  1% TDS to be deducted on payments dedicated for transfer of cryptocurrencies

·         TDS will be applicable beyond

·         The amendments will come into effect from 01-04-2022

·         Digital asset gifts are likely to be taxed once received by recipients

Cryptocurrencies will now be classified as capital holdings and there will be 1% TDS or tax deducted on the source on the sale and purchase of cryptocurrencies crossing a specific threshold. This initiative will help the government to track crypto investors and the major cryptocurrencies like Bitcoin, Ethereum, Litecoin, Dogecoin, etc. will be covered in the budget as well.   

What can be the benefits of crypto taxation?

As per industry experts, the Union Budget 2022 is going to bring positive changes with the introduction of a proper tax framework for crypto-generated incomes. The regulation yet to be set on crypto trades is not going to stop Indians to deal in cryptocurrencies, but the government levies TDS (tax deducted at source) and TCS (tax collected at source) on the buying and selling of cryptocurrencies beyond a threshold limit. However, there are certain benefits that this budget will provide the crypto holders –

·   Buying and selling of cryptocurrencies could be included under the realm of reporting in the SFT (Statement of Financial Transactions).

·  Taxing authorities will be using the report from sale and purchase shares to collect information on specific high-value transactions.

·  There can be chances of introducing higher tax rates for gains made by traders from cryptocurrency trading.

·   The tax collected from crypto dealings will be 30% and will be similar to the gains made from lottery, games, puzzles, etc.

· Cryptocurrencies might be regulated by SEBI or the Securities and Exchange Board of India and can be treated is as an investment tool.

·      Virtual asset portfolios can be diversified and can be treated as separate investment instruments.

There are many other benefits but as of now, the proposed Union Budget might bring about tougher measures for crypto dealings in India. The government might introduce a regressive tax regime for cryptocurrency dealings.

The good thing is that the latest Union Budget might drive Cryptocurrency development in India as virtual assets are already in use in the country. Still, more clarity is needed on how things will fall into place and more information to be shared later on cost of acquisition, platform commissions, and gas fees.