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The Indian Finance Minister Nirmala Sitharaman was unequivocal when she declared that “I don’t wait until regulations come in place to tax people making profits.” However, on NDTV’s question on the new tax, the FM clarified that the tax is only on earnings made from digital assets and “not taxing currency that is yet to be issued.”
Proposed 30% tax
The logic in the proposed 30% tax on the profits accrued from the crypto trade. Delineating the difference between Digital assets, which includes the “crypto world” and digital currency, which only the central bank can issue, Ms. Sitharaman has thrown some light into her Union Budget announcement to tax profits from digital assets transactions at 30 percent.
NDTV quoted the FM as saying,
“Let’s first understand we are not taxing currency that is yet to be issued. And that provision has been now made, and the currency in the name of the digital rupee will be issued. The exact name you will get a bit later, but the Reserve Bank is the one who is going to issue it. And what Reserve Bank issues is the digital currency. Everything outside of it in the name of digital whatever are assets being created by individuals.”
And in transacting those assets, if profits are being made, we are taxing that profit at 30 percent… So, there will be 1 percent TDS (tax deducted at source) in every transaction in the crypto world. So, the distinctions are very clear. The currency is with the Reserve Bank. That will get issued sometime this year. The transactions happening in the crypto world are of different kinds of assets, and for that, every transaction gets taxed,” Ms Sitharaman added.
Lack of clarity on digital assets
Crypto watchers have consistently pointed out the lack of clarity in taxing digital assets at a time when cryptocurrencies are not under any regulation. The FM contended that she could not wait for rules before taxing people making profits.
The RBI will issue a digital currency. A currency becomes or is a currency only when the central bank gives it, even crypto. Anything outside of that is even loosely referred to as cryptocurrencies; they are not currencies.
So the RBI will issue the digital currency, and all other digital assets will be deemed assets. We will have to wait for some time before we know the exact name of the digital currency issued by RBI. Everything outside of it is in the name of digital, whatever assets are being created by individuals.