In her speech of the federal budget on Tuesday, India Finance Minister Nirmala Sitharaman indicated that income from crypto and other digital assets will be taxed at 30%.
Apart from putting revenues from cryptocurrencies and non-fungible tokens (NFTs) in India’s highest tax bracket, Sitharaman also stated that losses from their sale could not be deducted against other income, providing yet another deterrent to digital asset trading and investing.
According to industry estimates, India has 15 to 20 million crypto investors, with total crypto assets valued at roughly Rs 400 billion ($5.37 billion). However, there is no official statistics on the volume of the Indian crypto market.
Promoters of digital currencies expected that the creation of a formal tax system would protect the crypto business from some of the harsher measures that the government was considering.
“While the 30% tax on income from virtual digital assets is a high tax, it is a welcome step because it validates crypto and indicates to an optimistic mindset toward future acceptance of crypto and NFTs,” said Avinash Shekhar, CEO of bitcoin exchange ZebPay.
Individuals in India could end up paying more than 30% of their crypto income in taxes and other fees, according to tax professionals.
Crypto exchanges also believed that the new taxation system would signal the government’s support of digital currencies, allowing corporations to enter the market.
“We also expect that this step clears up any misunderstanding for banks, allowing them to provide financial services to the crypto business,” said Nischal Shetty, CEO of WazirX, a virtual currency exchange.
The Reserve Bank of India has expressed “severe worries” about private cryptocurrencies, claiming that they could cause financial instability. As a result, some banks cut relations with cryptocurrency companies.
The finance minister also stated that the central bank will launch a digital currency using blockchain and other supporting technology in the coming fiscal year.