India announced plans to start a digital currency and tax crypto assets, as the country keeps pace with the global move toward virtual financial instruments.
Income from the transfer of any virtual digital assets will be taxed at 30%, Finance Minister Nirmala Sitharaman said in her budget speech on Tuesday.
The move was prompted by India’s rapid adoption of virtual coins, putting the nation a step closer to regulating such investments following several warnings from the central bank about the risks of money laundering, terrorist financing and price volatility.
“There’s been a phenomenal increase in transaction in virtual digital assets,” Sitharaman said. “The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”
The finance minister also announced the launch of a central bank digital currency in the financial year starting April to usher in cheaper, more efficient currency management. The Reserve Bank of India has been working on a phased implementation strategy, which could reduce dependency on cash.
India’s move comes after China already began CBDC trials in several cities, while the US Federal Reserve and Bank of England are looking into possibilities for their economies.
The crypto market in India grew 641% in the year through June 2021, according to an October report from Chainalysis, an industry research firm.
Other key points on crypto assets from the budget speech include:
- Losses from transfer of digital assets can’t be set off against any other income
- Gift of virtual assets will be taxed in hands of recipient
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