India will reportedly impose a 30% tax on income from cryptocurrencies and other digital assets, finance minister Nirmala Sitharaman said in a recent federal budget presentation.
Apart from imposing income tax on cryptocurrencies and non-fungible tokens (NFTs) with high taxes in India, Sitharaman also said losses from their sales could not be offset by other income. This presents an additional disadvantage in cryptocurrency trading and investing.
Data shows industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around 400 billion rupees ($ 5.37 billion). No official data is available on the size of the Indian crypto market.
Proponents of cryptocurrency have previously been very hopeful that a formal tax framework could at least save the cryptocurrency industry from some of the tougher measures the government has considered.
Some see the steps taken by this government as better than continuing to ban it altogether in India.
According to Avinash Shekhar, chief executive of ZebPay, cryptocurrency exchange, “The thirty percent tax on income from virtual digital assets, although high, is a positive move as it allows the crypto industry to operate and optimistic sentiment towards further adoption of crypto and NFT,”.
The crypto exchange also hopes the imposition of the new tax will signal the acceptance of cryptocurrencies by the authorities, and convince corporates that they can enter the market.
"We also hope that this development eliminates any worries for banks and they can provide financial services to the crypto industry," said Nischal Shetty, CEO, WazirX.
India's central bank has voiced "serious concern" over cryptocurrencies on the grounds of bringing financial instability. As a result, some banks decided to partner with crypto firms.
The finance minister also said that the central bank will introduce a CBDC in the coming year that uses blockchain and other supporting technologies.
