Key Crypto Takeway 22-23

Crypto Smartlife Research Team
Feb 11 2022 . 2 Minutes Read
On 1st February 2022, the Union Budget was presented by our Finance Minister Nirmala Sitharaman which was noteworthy as it was the shortest address by her in 4 years and also for bringing clarity around Crypto taxation.  During the speech, Sitharaman said that the Indian economy is estimated to grow by 9.2 percent in the current financial year.

The Indian government had expressed its interest in the Crypto space the previous year when it commented on drafting regulations for the industry. While there were certain speculations of the Crypto Bill to be presented in the parliament, the announcement of taxation of crypto assets during Budget 2022 was a welcome surprise for the Indian crypto industry. The taxation policy and several other announcements hint at a bigger picture. Let’s take a look into the key insights of Budget 2022-23 around Crypto Space:

Crypto as a Virtual Digital Asset

The govt has clubbed Cryptocurrency, NFT, and various other assets as Virtual Digital Asset going forward. As a result, it has positively shaped the perception of potential crypto investors who were uncertain about its legal position in India. Investors who’ve been Interested but sat on the sidelines can finally participate in crypto now with its acceptance as a virtual asset class.

30% taxation on Virtual Digital Asset

Giving clarity on taxation of cryptocurrencies and other virtual assets, Sitharaman proposed a 30 percent tax on income from transactions in such assets w.e.f 1st April 2022. No deduction in respect of any expenditure to be allowed other than the cost of acquisition. Gifts in Crypto or other digital assets to be taxed at the hand of the recipient.

The stage is set for RBI

Budget proposed introduction of Digital Rupee by RBI using Blockchain technology starting from FY23. The introduction of central bank digital currency will give a huge boost to Digital India and people would be less reluctant towards the Virtual Digital Assets too. Also, it will lead to a more efficient and cheaper digital currency system.

Withholding tax on the transfer of Virtual Digital Asset

For transfer of Virtual Digital Asset to the resident, 1% TDS would be deducted on payment of consideration w.e.f 1st July 2022. If payment is made wholly in kind, or partly in cash and partly in kind and the cash component is not sufficient to deduct TDS, the person is responsible for paying the consideration to ensure that TDS has been deducted and paid before releasing the consideration.

The banking sector has always been non-committal to the Crypto Industry but the budget regime has flipped the situation. It could invite the banks to come forward and maintain a cordial and symbiotic relationship with the Crypto world. The announcement of the tax regime is just the beginning of a new chapter of crypto in the Indian economy. The government is currently testing waters, and multiple likewise laws and regulations will follow closely.

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