Govt has sovereign right to tax cryptocurrency: FM Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman has affirmed that the government is empowered to impose taxes on the profit earned from cryptocurrency transactions and the decision on banning or legalising them will be taken once the ongoing discussions are done.

While responding to queries raised by Congress member Chhaya Verma on cryptocurrency, the Finance Minister at the Rajya Sabha said, “I am not going to legalise it or ban it at this stage. Banning or not banning will come subsequently when consultations give me inputs.” 

When asked further on the profits garnered from buying and selling of cryptocurrencies, she said, “Whether it is legitimate or not is a different question, but I will tax because it is a sovereign right to tax”. 

The Finance Minister while presenting Annual Budget 2022-23, had stated that the government will levy a 30% tax on gains made from any other private digital assets from April 1. She was also categorical said that the tax will be imposed on gains derived from cryptocurrency trades irrespective of the individual’s income tax slab. Furthermore, a one per cent tax deducted at source (TDS) will be applicable on the transfer of such virtual assets (including cryptocurrencies) over a certain threshold. 

She also mentioned that a Blockchain-based and RBI-backed Central Bank Digital Currency (CBDC) will be rolled out by 2023. 

“There will not be any compensation in case of losses accrued. Furthermore, any sort of gifts in virtual digital assets would be taxed in the hands of the recipient, she stated while presenting the budget. 

Principal Economic Adviser Sanjeev Sanyal had earlier maintained that Cryptocurrency has some ‘financial stability issues and the government will take a “balanced view” on the same. 

All eyes are now on the impending ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’, which was earlier listed for the Winter Session of the Parliament. However, this could not happen and there are further expectations from the Budget Session.