India on Tuesday said it would impose a tax of 30% on income from transfer of virtual digital assets such as cryptocurrencies.
"There has been a phenomenal increase in transaction in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime," Finance Minister Nirmala Sitharaman said in her Budget speech for 2022-23 in Parliament. Accordingly, "I propose to provide that any income from transfer of any virtual digital asset shall be taxed at a rate of 30%".
Further, any gift of digital assets would be taxed at the rate of 1% in the hands of the recipient, she said. Besides, loss from the transfer of virtual digital assets cannot be set off against any other income.
The move to tax digital assets is clearly aimed at discouraging investments in such currencies, which have no inherent value and which pose severe risks to small investors.
Sitharaman also proposed to launch a state-backed digital rupee using blockchain and other technologies, adding that the same would be issued by the central bank in 2022-23. This, she hoped, would give a big boost to the economy.
Virtual currencies have exhibited wild swings, yet they have become extremely popular with a range of investors, particularly youngsters and teenagers. Many around the world turned millionaires and billionaires by betting on such assets, drawing in more investors looking to get rich quickly.
India attracted crypto investments worth $638 million across 48 funding rounds in 2021, according to data from industry tracker Tracxn.