In a move to regularise and regulate cryptocurrency, the Indian government has announced Tuesday, February 1, its plans to impose a 30% tax on all crypto-related income moving forward. The country now joins other crypto-friendly nations including the US, El Salvador and various European Union nations in regulating digital assets.
In addition to the crypto tax, Finance Minister Nirmala Sitharman introduced a stablecoin that’s pegged after the Indian Rupee which will be controlled by the state’s central bank.
‘The introduction of central bank digital currency will give a big boost to the digital economy,’ Sitharma said in her announcement.
‘Digital currency will also be a cheaper and more efficient currency management system,’ she added.
The digital rupee is expected to be released before the end of the new fiscal year which is around April 2023 per Sitharman’s announcement.
‘There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,’ she said during her parliamentary speech.
The two-pronged announcement by Sitharman settled one of the biggest questions of Indian crypto traders which is about banning crypto transactions. This is amidst the recent bill proposal by Indian Prime Minister Narendra Modi around November 2021 about an outright ban on digital assets not controlled by the state.
With the proposed 30% crypto tax, the Indian government effectively made trading and transactions using digital assets legal and regulated.
Crypto traders in India greeted the two-pronged announcement with relief. Crypto platform WazirX founder, Nischal Shetty said in a recent tweet that he hopes to see a reduction of crypto ban fear in India with the recent news.
‘Lot to unpack here but overall this is a very positive step forward for crypto ecosystem in India,’ added Shetty on his Twitter thread.
Sumit Gupta, co-founder of India-based crypto platform CoinDCX shared the same positive sentiments as Shetty regarding the announcement.
‘Taxation of virtual digital assets or crypto is a step in the right direction. It gives much-needed clarity and confidence to the industry,’ Gupta said.
Previously, the Indian government has expressed its desire to remove paper currency by using advanced blockchain technology to support this, despite the mixed reviews on crypto trading by Narendra Modi’s administration.
The Indian financial authorities removed some of the paper currencies in circulation as a means to combat corruption but backfired. The radical move sparked turmoil in the nation’s economy as well as met by criticisms by experts.
Around November last year, Rabi Sankar, a senior official of the Reserve bank of India said that the government should develop a digital version of the rupee as a way to rival hard-to-track digital currencies in the market. This was also around the time when Mudi was eyeing an outright ban for crypto.
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