Crypto now is now legal in India. The country will impose a 30% tax on income from cryptocurrencies and other digital currencies, officials said, which will put them in the highest tax band.
Finance minister Nirmala Sitharaman made the announcement Tuesday while presenting the budget.
The tax would also apply to gifts of digital assets, with recipients being liable to pay the levy.
“The government will also track the money trail in crypto deals and every transaction will have 1% TDS imposed,” Sitharaman said, referring to tax deducted at source.
She also said the central bank will introduce a digital currency in the next financial year using blockchain and other supporting technology.
Sitharaman said that introduction of a central bank digital currency will give a boost, a big boost to digital economy.
“Digital currency will also lead to a more efficient and cheaper currency management system,” she added.
Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around 400 billion rupees , or $5.37 billion, according to Reuters.
The announcement contrasts from November when the Indian government announced that it was introducing a bill in its Winter Parliament Session to ban private cryptocurrencies.
‘The bill would “allow for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
President Narendra Modi had said cryptocurrencies can endanger local youth and pose “serious concerns on macroeconomic and financial stability.”
However, a week later, officials said that instead of banning cryptocurrencies, the government planned to to regulate it as an asset class instead.
A Cabinet note distributed to the Indian government states that cryptocurrency will be regulated rather than flat-out banned.
The reaction on social media seemed general supportive with one poster on Twitter saying that “by bringing in Taxation on Crypto, India has indirectly legalized it.”
“30 percent tax is nothing,” he said. “That’s roughly a days movement in cryptos Welcome move.
“Even though the #budget did address the tax concerns related to #crypto in India, some things are not well thought out,” another said. “If no set offs or expenditure is allowed, it is going to be terrible for miners. This will discourage the industrial aspect of the ecosystem.”
China banned cryptocurrency last year, but the country is allowing some cities and entities to try out blockchain applications.
Bitcoin was down 3.54% to $37, 475 at last check.