DNA Special: Budget 2022 – Implications of the government’s decision on cryptocurrency

The Union Budget 2022 is a futuristic budget that outlines the economic roadmap for the next 25 years, i.e., up to 2047, when India will complete 100 years of its independence. Along with being futuristic, the budget aims to make India a super power in the digital world. It has announced a 30 percent tax on earnings from digital currency. Budget also announced that the Reserve Bank of India (RBI) will launch India’s new digital currency this year. Apart from this, many big announcements have also been made for the expansion of digital services in the fields of education, health and defence. Banks will also be digitally linked to the Post Office of India Post.

But the point that became the headline of this budget is the new tax imposed by the government on digital currency or crypto currency.

30 percent tax will now be levied on earnings from digital currency in India. This means, if a person invests Rs 100 in a digital currency now and he gains Rs 10 on it, 3 rupees out of this profit will have to be paid as tax.

Apart from this, one percent TDS will have to be given to the government separately on every single transaction of digital currency. Suppose, a person has invested in a digital currency. This investment is his asset. Now if this person transfers this asset to someone else, he will have to pay TDS separately at the rate of one percent on the total cost of that asset. TDS stands for Tax Deduction at Source. That is, the tax that is levied on a source. For example, the tax that the government charges on the salary you get every month is TDS. That is, overall, the government is considering digital currency as an income source and 30 percent tax has also been imposed on its earnings.

Now a lot of people are asking the question whether the government has taxed digital currency and made it legal?

The answer lies in both yes and no. In fact, the government is considering only those digital currencies as legal which will be issued by the Reserve Bank of India. This means that the cryptocurrency that exists right now, such as Bitcoin, will not be considered digital currency. Rather, it will be considered a digital asset. If you find it all complicated, then think of it as if the gold you buy or what is your home is your asset. It is your property, not a currency. Similarly, cryptocurrency will be an asset to the Government of India, and people will be taxed on it. So, if you are thinking that a digital currency like Bitcoin has been considered legal, then it will not be technically correct. However, people will be able to invest in it.

At present, in countries like the US, UK, Italy, Netherlands and Australia, digital currency is taxed in the same way by the governments there, due to which this currency is considered legal in these countries. However, in some countries, there is an exception to this.

Under this by the year 2023, the Reserve Bank of India (RBI) will launch its digital currency separately, which will be more secure and stable than the rest of the currencies. In simple language, it’s like… The RBI prints paper currency, just like that, the digital currency with its seal will also come, which will enable people to invest in it. One more thing in this budget was not noticed by many people and that is, if a person sends a gift digital currency to another person, then in such a situation, the person who gets this currency, he will have to pay 30 percent tax.

One of the major reasons behind this decision of the government may be that the number of people who have invested in cryptocurrency in our country, are about 8 percent of the population. These people are currently betting their Rs 70,000 crore as digital currency. Indians are at the forefront of using cryptocurrency in the whole world. Simply put, this 30 percent tax will directly give a guarantee to an investment of Rs 70,000 crore. And it may increase its use in India. Secondly, the government knows that after this decision, people will be encouraged to invest in digital currency. So, the choice.

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