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The finance minister of India said that the central bank will launch a digital cryptocurrency.


A security guard is seen next to the logo of the Reserve Bank Of India (RBI) at the RBI headquarters in Mumbai, India, June 6, 2019. REUTERS/Francis Mascarenhas
India will impose a tax of 30% on income from cryptocurrencies and other digital assets, finance minister Nirmala Sitharaman said while presenting the federal budget on Tuesday.
Aside from placing earnings from cryptocurrencies and non-fungible tokens (NFTs) in India's highest tax band, Sitharaman also said losses from their sale could not be offset against other income, delivering another disincentive to trading and investment in digital assets. This could have a significant impact on the Indian cryptocurrency market.
Crypto investors in India are estimated to number between 15 and 20 million, with total holdings worth around 400 billion rupees. There is no official data on the size of the Indian crypto market.
Supporters of digital currencies have been hoping that the establishment of a formal tax framework could at least spare the crypto industry from some of the more draconian measures that the government had been considering.
Avinash Shekhar, chief executive of ZebPay, a cryptocurrency exchange, said that the thirty percent tax on income from virtual digital assets is a positive step, as it legitimizes crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs.
Crypto profits could end up costing individuals more than 30% in tax and other charges, tax consultants reckoned.
"If you made a profit of 100 rupees then including the 30% tax bracket, plus surcharge and cess the total tax outgo will be around Rs. 42," Amit Maheshwari, partner at AKM Global, a tax and consulting firm told Reuters.
Crypto exchanges also hoped the the new tax regime would signal acceptance of digital currencies by the authorities, and reassure corporates that they can enter the market. This would help to legitimize the industry and boost its growth.
"We also hope this development removes any ambiguity for banks and they can provide financial services to the crypto industry," said Nischal Shetty, CEO, WazirX, another virtual currency exchange. We hope this development removes any ambiguity for banks and they can provide financial services to the crypto industry.
India's central bank has voiced "serious concerns" around private cryptocurrencies on the grounds that these could cause financial instability. As a result, several banks ceased their relationships with crypto firms.
The finance minister also said that the central bank will introduce a digital currency in the next financial year. The central bank will use blockchain and other supporting technology to introduce the digital currency.
The introduction of a central bank digital currency will give a big boost to the digital economy. Sitharaman added that this would also lead to a more efficient and cheaper currency management system.

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