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- Reserve Bank of India to start issuing digital rupee in 2022-2023
- Crypto tax highest in India, but is good for the crypto space
India’s finance minister has proposed the introduction of a digital rupee alongside plans to tax cryptocurrency incomes.
In her 2022-2023 union budget speech, finance minister Nirmala Sitharaman proposed key measures to support the government’s 25-year vision, which includes plans to boost the digital economy and fintech technology-enabled evolution.
“This budget seeks to lay the foundation and give a blueprint to steer the economy over … the next 25 years, from India at 75 to India at 100,” the minister said in the country’s parliament referring to years since independence in 1947.
As part of this plan, the government proposes to introduce a central bank digital currency (CBDC), joining 39 other countries around the world that are either working on the development of a CBDC, in pilot phase or have already launched their digital fiat.
The digital rupee will be powered by blockchain and other technologies and will be issued by the Reserve Bank of India starting from 2022-2023.
“The 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.
At the same time, the minister proposed a new scheme to tax cryptocurrency gains, which requires crypto holders to pay a 30 percent tax after any income resulting from the transfer of a virtual digital asset.
The provision has been proposed as part of the Finance Bill, which specifies that this category includes any token generated through cryptographic means or otherwise, nascent and fast growing non-fungible tokens, and any other digital asset that the government may specify.
The proposed crypto tax is the highest tax rate in the country, and the tax regime seems to draw a parallel between crypto and gambling, Anoush Bhasin, founder of New Delhi-based cryptocurrency tax advisor Quagmire Consulting, told VIXIO.
Although most other countries are attempting to recognise and categorise digital assets under an existing asset class, the proposed Indian framework would treat virtual digital assets as a separate asset class apart from property, commodities and securities, he added.
If passed into law, the tax requirement takes effect next April.
The proposal comes after crypto adoption saw a significant surge in India last year.
Although official data is not available, experts estimate there are around 15m to 20m cryptocurrency holders in the country with total crypto holdings reaching 400bn rupees.
The finance minister reasoned that “the magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime”.
This is “definitely a positive and welcome step for the Indian ecosystem”, Bhasin said.
Although levying taxes on an income does not guarantee legality, it certainly does lend greater legitimacy to the asset class, Bhasin explained.
“This is likely to be the first step, of many, towards a broader regulatory framework around virtual digital assets,” he added.
Although rumours arose late last year that India would ban cryptocurrencies, it was later reported that this was not the intention of the government and that it would instead look to increase its supervision over the digital asset.
Going forward, it is more likely the south Asian country will propose to bring cryptocurrencies under the supervision of the country’s central bank and give the Securities and Exchange Board of India (SEBI) the authority to regulate existing crypto exchange platforms.
