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The budget for 2022 is the one that sparked the cryptocurrency craze

05 August 20224 mins read by Angel One
The budget for 2022 is the one that sparked the cryptocurrency craze
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India has finally implemented a crypto tax system! The government adopted a cautious stance on taxes in the 2022-23 budget, setting a fixed tax rate on revenue from digital virtual assets. Finance Minister Nirmala Sitharaman said in her Union Budget presentation that revenue from the transfer of virtual digital assets will be subject to a 30% tax. She further said that no set-off would be permitted in the event of losses. Furthermore, gifts of virtual digital assets would be taxed in the recipient’s hands.

The values of most major crypto coins listed on Indian markets were unaffected. Minister Sitharaman said the scale and frequency of transactions in “virtual digital assets” had made it necessary to create a special tax framework. Cryptocurrency professionals and investors were anticipating clarification on taxation of profits from crypto assets in Budget 2022 ahead of the announcement.

Becoming more open to cryptocurrency

Some feel India has taken a step closer to accepting cryptocurrencies after years, as the nation tries to stay up with the global trend toward digital assets. In her budget presentation on 1st February, the Finance Minister said that the RBI would introduce its virtual currency this year. She also said that the nation aims to tax gains from the transfer of virtual assets at a 30% rate, thereby putting an end to any questions about the legality of such activities. Please note that it is not a legal tender yet.

Cash-dependent India has joined nations such as China in developing digital versions of their currency in order to make use of emerging technology and make transactions more efficient. At the same time, despite the central bank’s warnings about the hazards of money laundering, terrorist funding, and market volatility, the high tax rate on cryptocurrency might deter traders.

Cryptocurrency: Further implications

This budget will go down in history as an important moment in the debate over the use of cryptocurrency as a currency. When it comes to cryptocurrencies, the Finance Minister has been blunt in her criticism. Profits on certain assets will be taxed at 30% by the government. The government’s proposal of a 30% tax on digital assets, along with the development of its own digital currency, indicates that it seeks to discourage cryptos. Apart from putting revenues from cryptocurrencies and NFTs in the higher tax bracket, losses from their sale cannot be deducted from other income, creating yet another deterrent to trading and investing in digital assets. TDS shall be applied to payments made in connection with the transfer of a virtual digital asset at a rate of 1% of the amount paid over a certain monetary threshold.

This will be a major setback for crypto traders, and many believe that this budget will go down in history as the one that might have put to bed the dispute over whether the government would ever accept any non-RBI issued cryptocurrency as a currency.

‘Crowding-in’ the capital expenditures

Another important discussion from the Union Budget fy23 is that of the country’s capital expenditure. In this Budget Session, the government has increased its Capex budget dramatically. If you read the small print, you’ll see that the budget number combined with the off-budget capital number isn’t all that remarkable. Nonetheless, this investment will help increase economic development and generate employment. Private sector capital spending is urgently needed, but there are several obstacles to overcome before it can begin.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.

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