Private crypto operators in India face an uncertain future. The Indian government’s recent decision to tax income from crypto assets has rattled the industry.
While presenting the union budget on February 1, Finance Minister Nirmala Sitharaman proposed a 30% tax on gains made from any virtual digital assets from April 1. The budget also proposed a 1% tax deduction at source on payments toward virtual currencies beyond 10,000 rupees in a year and taxation of such gifts in the hands of the recipient.
Crypto industry representatives reportedly met with finance ministry officials and gave their representation on key concerns. They have asked the ministry to revisit the 30% tax on income from transactions in crypto assets.
They also said that imposing a 1% tax deduction at the source would be difficult to comply with, especially in a situation when crypto-assets are purchased from a foreign seller.
Industry experts feel the budget proposals lacked clarity on many issues and more deliberation was needed before imposing these taxes.
The issue of the legitimacy of cryptocurrencies continues to remain uncertain in India. A day after presenting the budget, the Finance Minister said the taxing of income from digital virtual assets does not give them legitimacy and this issue was being dealt with separately in the planned cryptocurrency Bill.
On the other hand, the Indian government is planning to introduce a digital currency in the next financial year. The Indian digital rupee will be the digital version of physical cash issued by the central bank and will, therefore, be sovereign-backed.
As cryptocurrencies are not backed by a government or central bank, they could lose out on the trust factor.
The Reserve Bank is now holding discussions on its Central Bank Digital Currency, or the digital rupee. Reserve Bank of India Governor Shaktikanta Das said it does not want to rush with the proposed digital currency and was examining all aspects before its introduction.
Das has been very critical of private cryptocurrency operators and considers them a threat to macroeconomic and financial stability.