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India on Tuesday announced measures to boost its digital economy, which include the creation of a digital rupee to facilitate currency management, and the implementation of a 30% tax on income from transfers of virtual digital assets, including cryptocurrencies and NFTs.
This was communicated today by Finance Minister Nirmala Sitharaman at the presentation of the general state budget for the next Indian fiscal year, which begins in April this year and ends in March 2023.
Sitharaman informed that the Reserve Bank of India (RBI) will issue this digital rupee during the fiscal year 2022-2023, which “will give a major boost to the digital economy and lead to a more efficient and economical currency management system” through blockchain technology.
Unlike all other cryptocurrencies, which do not depend on any central bank, the future Indian currency will follow the regulations set by the RBI and its value will be equivalent to that of the real rupee.
At present, several Caribbean countries and Nigeria are the only ones that have officially approved this method of payment, through a virtual version of their currency.
Other nations, such as China, have launched pilot projects to evaluate the potential of this practice.
The current Indian government already expressed its interest in creating a digital currency last year, when it announced a bill to restrict private cryptocurrencies in India and at the same time create a legal framework for the creation of a digital currency issued by the central bank.
This measure, however, has not yet seen the light of day, despite the fact that it was scheduled to be discussed during the winter term sessions of Parliament, which were held between November and December 2021.
Taxation of cryptocurrencies
The Executive also notified today that it would introduce a 30% tax on transfers of virtual digital assets, where cryptocurrencies and NFTs are framed.
“I propose to provide that any income from the transfer of any virtual digital asset shall be taxed at a rate of 30 %. No deduction will be allowed in respect of any expenditure or allowance in computing such income, except the cost of acquisition,” Sitharaman said.
This is a turnaround from India’s previous positioning on cryptocurrencies.
In 2019, the current government attempted to introduce a draft law to ban digital currencies that provided for jail terms of up to 10 years for possession, use or mining of cryptocurrencies, after a committee formed by the finance ministry recommended a ban.
But in May 2020, the Supreme Court of India called the RBI’s blocking of cryptocurrencies illegal and asked the government to regulate this gray area of Indian law.
