Taxing cryptocurrencies does not give them legal status, clarifies India’s finance minister
Feb 11, 2022, 14:44 IST
- India’s Finance Minister Nirmala Sitharaman clarified in Parliament that taxing cryptocurrencies does not give them any kind of legal status.
- According to her, taxing ‘virtual digital transactions’ is the Indian government’s sovereign right.
- The decision on whether or not the country will ban cryptocurrencies will come after consultations, Sitharaman stated.
AdvertisementIn a blow to crypto companies in India, the country’s stance on whether or not to ban cryptocurrencies has nothing to do with its recently announced tax on cryptocurrency transactions.
Finance Minister Nirmala Sitharaman told the upper house of Parliament it’s the country’s sovereign right to tax cryptocurrency transactions. However, any official stance on regulation will only come once the ongoing consultations are completed.
Her comments come after industry players welcomed the government’s move, despite the high tax rate of 30%, because it gave some kind of legitimacy to India's crypto ecosystem. “By bringing in taxation, the government legitimises the industry to a large extent,” noted Nischal Shetty, the CEO of WazirX, after the budget announcements in contradiction to Sitharaman’s comments today.
Not only did the government introduce a tax on transactions of ‘virtual digital assets’ — which also includes non-fungible tokens (NFTs) — it also announced a 1% tax deducted at source (TDS) on the transfer of such assets over a certain threshold, yet to be specified.
India’s crypto legislation is still a work in progress
India planned to go public with its crypto bill twice last year, and both times the legislation never made it into Parliament for discussion. In earlier comments, Sitharaman clarified that the long-awaited crypto bill is most definitely different from the 2019 proposal, which took a very hard stance against any kind of crypto activity, from mining to trading.
However, it needs to be approved by the Cabinet — India’s highest decision-making authority — before it can make it into Parliament. And, that’s the stage where it continues to be stuck.
Keeping India’s tumultuous history with cryptocurrencies in mind — the 2018 ban on cryptocurrencies by the Reserve Bank of India (RBI) and then the Supreme Court’s verdict which overturned that directive two years later — it’s not surprising that the government is taking its time to frame the new laws before introducing them into the public domain.
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