Union Budget 2022: Crypto experts laud recognition

In the Budget 2022, Union Minister of Finance Nirmala Sitharaman announced on Tuesday that transfer of any digital/cryptocurrency asset will be taxed at 30 per cent. However, the Centre has not yet confirmed if and how it will allow use of cryptocurrency.

Giving a massive push to the digital infrastructure, the minister allocated Rs 7.5 lakh crore towards capital expenditure for 2022-23. In her address to the nation, she said, "The Reserve Bank of India is going to issue its digital currency, and everything outside of that, which is loosely referred to as crypto, is not currency. A currency becomes, or, a currency is, a currency only when it is issued by the central bank, even if it is crypto."

Rishi Anand, partner at DSK Legal, told mid-day, "This appears to a kind of blessing to the crypto traders and investors of India. Although flat 30 per cent tax rate may not be the best outcome (i.e., without considering aspects of long- and short-term gains basis the time period of holding of such assets), but with this declaration, at least the government now recognises cryptocurrencies as an asset class for the purposes of taxation. Taxation on buying and selling of NFTs is still unclear, but they are likely to follow the same tax regime. In the trade of digital assets, determining the identity of the payee is a challenge, and therefore transparency and disclosure on digital assets transactions is something which the government will look at from the exchanges/platforms."

Sameer Jain, managing partner at PSL Advocates & Solicitors, said, "My first impression of the announcement is that it is punitive in nature. Not allowing any deduction or set-off against losses to calculate tax on crypto gain is not in line with the tax regimes around. Trading in crypto has been, in essence, declared as an isolated transaction for an individual, which will be taxed irrespective of the overall losses. Only deduction allowed is the cost of acquisition. Further, it is to be seen whether such tax would be specific to the type of cryptocurrency/NFT traded or the calculation will, at least, allow people to set-off the loss on any other cryto/NFT traded. TDS of 1 per cent has been introduced to collect data on people's trading. More clarity will be available once the text of the provision is put out in the public."

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Tax on transfer of any digital/crypto asset