FM Sitharaman: Taxing income doesn’t give cryptos legitimacy

Finance Minister Nirmala Sitharaman said that the government has the sovereign right to tax profits generated by cryptocurrency transactions, and that the decision on whether to ban or not to ban will be based on feedback from consultations.

Replying to the general discussion on Union Budget, the FM Sitharaman 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 input”.

She stated about the profit generated by cryptocurrency transactions is significant that “Whether it is legitimate or illegitimate, it is a different question, but I will tax because it is a sovereign right to tax”.

The minister was responding to a question about cryptocurrency from Congres member Chhaya Verma. Verma had inquired about the legality of levying a tax on cryptocurrency.

Read Also: Income Tax on Cryptocurrency income : TDS, loss, Reporting

Only RBI-issued ‘Digital Rupee’ will be recognised as currency, FM Sitharaman said in her Budget speech on February 1, and the government will levy a 30% tax on gains made from any other private digital assets from April 1, 2022.

Budget 2022-23 proposes a 1% TDS on transfer of virtual currency \ exceeding Rs 10,000 per year, as well as taxation of such gifts in the hands of the recipient. For specified persons, the TDS threshold limit would be Rs 50,000 per year.

In addition, when calculating income from transactions in such assets, no deduction for any expenditure or allowance shall be allowed. It has also stated that losses incurred from the transfer of virtual digital assets will not be allowed to be deducted from other earnings. The provisions related to 1 per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1, 2022.