Though the government has yet to confirm whether and how it will allow cryptocurrencies, sources for long have said that cryptocurrencies will be treated as a digital asset. While presenting the Budget today, Finance Minister Nirmala Sitharaman said that income from digital assets will be taxed at 30%, the highest tax band in the country.
After initially planning to ban cryptocurrencies, the Modi government is instead preparing legislation to regulate their use.
Losses from transactions in virtual digital assets cannot be offset against other income, the Finance Minister said.
There are an estimated 15 million to 20 million cryptocurrency investors in India, with total crypto holdings of around Rs 40,000 crore ($5.29 billion), according to industry estimates.
The RBI has voiced “serious concerns” around private cryptocurrencies on the grounds that these may cause financial instability. The Finance Minister said today that the RBI will this year introduce a digital rupee, backed by blockchain technology.
“Introduction of a central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” Ms Sitharaman said.
The government is leaning towards allowing cryptocurrencies as a financial asset; though the user will not be able to make payments with them, they can be held like shares or gold.