One of the most-awaited announcements in the budget presented today was about the government’s stand on digital assets like cryptocurrency, NFTs, etc. It was announced that the government will tax gains from these digital assets at a flat rate of 30%.
As per the announcement from the finance minister, investors will not be able to offset their losses from the gains and only the cost of acquisition can be deducted from the amount received from the sale of digital assets.
It is important to understand the various facets related to this announcement:
Read also: Budget disappointing, directionless, useless: Telangana CM
Why virtual digital asset announcement in the budget is important?
The announcement is important because it clarifies the stand of the government. In addition, the announcement also removes the ambiguity over investments in such asset classes being legal or illegal. Experts believe that this announcement will pave way for the steps that will be announced by the government in the upcoming crypto bill and other announcements related to virtual digital assets.
Which virtual digital assets will be taxed?
As per the details available in the Finance Bill tabled in the Parliament today, it is expected that the following digital assets will have to follow this announcement:
- Cryptocurrencies
- Non-fungible Tokens (NFTs)
- Decentralized Finance (Defi)
It is expected that traditional digital assets such as digital gold, central bank digital currency (CBDC), and other traditional digital assets will not attract this 30% taxation announcement.
Why is it a good announcement for the blockchain and crypto industry?
It is a positive sign for the crypto and blockchain industry in India because investors have some clarity over their investments and the rate at which they will be taxed. It is a drastic improvement from the stand of the government or RBI earlier in which it was suggested that crypto is a threat to the economy and should be banned.
The industry expects that the clarity provided by this announcement will make way for more innovations expected to come out of India in the Web 3.0 space.
Why is it bad?
While it is a good starting point, the announcement is not very encouraging for people who are in the lower tax slabs as they will have to incur a flat 30% rate on their investment gains in these asset classes. It is also expected that without the presence of any central regulator, tracking such transactions will be challenging.
Read also: Increase regulatory focus on cryptocurrency: Pre-Budget survey
The last word
The announcement by the government is a welcome step towards the growth of the cryptocurrency and blockchain industry in the country. It is expected that the next steps announced by the government in the coming months will further help regularize these industries and boost their growth in India.
