‘Is cryptocurrency legal now?’ asks Congress as Centre imposes 30% tax on digital assets transfer

Finance minister Nirmala Sitharaman on Tuesday announced the Union Budget 2022-23, during which she declared that the central government is imposing a 30 per cent tax on virtual digital assets, bringing cryptocurrencies and non-fungible tokens (NFTs) under a tax net. Reacting to the announcement, Congress general secretary Randeep Singh Surjewala asked the finance minister to clarify whether cryptocurrency has been made legal now.

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Pointing out that the cryptocurrency-related bill has to first pass the Parliament before the government can consider imposing a tax on cryptocurrencies, the Congress leader asked Sitharaman to clarify three key questions regarding the Centre's stance towards digital tokens –

1. What about cryptocurrency regulation/regulator(s)?

2. What about the regulation of cryptocurrency exchanges?

3. What about investor protection?

Taking to his official handle on Twitter, Surjewala posted, “And Ms. Finance Minister, pl do tell the Nation - Is Crypto Currency now legal, without bringing the Crypto Currency Bill, as you tax the crypto currency?”

Notably, finance minister Nirmala Sitharaman on Tuesday announced a 30 per cent tax on any income from the transfer of virtual digital assets, specifying that no deductions and exemptions will be allowed.

The gifts are to be taxed on the hands of the recipient, she said, adding that there will also be a 1 per cent tax deducted at source (TDS) on the payments made for the transfer of digital assets. It was also announced that any loss made on the transaction of such digital assets cannot be set off against any other gain.

In her Union Budget 2022 announcement, finance minister Nirmala Sitharaman also said that the country's central bank, the Reserve Bank of India (RBI), will introduce a digital currency in the next financial year using blockchain and other supporting technology.

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“Introduction of a central bank digital currency will give a big boost to the digital economy,” Nirmala Sitharaman said on Tuesday while presenting the federal budget. “Digital currency will also lead to a more efficient and cheaper currency management system.”

Earlier, India's central bank had voiced “serious concerns” around private cryptocurrencies on the grounds that these may cause financial instability.

The introduction of the much-talked-about Cryptocurrency and Regulation of Official Digital Currency Bill was highly anticipated this year, but the government left it out of its agenda in the ongoing Budget session. However, speculation was rife regarding the central government's official stance towards cryptocurrencies and any potential taxes that might be imposed on the same.