Is Crypto Legal Now?

Centre takes the first step towards legalising crypto by taxing gains at 30%. Here's what it means for investors.

- Avneet Kaur

UNION BUDGET FY2023 has finally ended the speculation about the impending ban on cryptocurrencies in India by introducing a 30% tax on transfer of virtual digital assets. The Finance Bill’s definition of virtual digital asset is wide enough to cover emerging digital assets, including non-fungible tokens (NFTs), metaverse assets, digital currencies and tokens. The industry has welcomed the move, though some veterans say that the high tax rate and no setoff of losses against other income may discourage people from dealing in cryptocurrencies.

Does recognition of digital assets under income tax laws mean they have got legal status? What are the grey areas?

Most importantly, what do the changes mean for investors?

Crypto is an Asset

“A currency is a currency only when it is issued by the central bank, even if it is a crypto. Anything outside of that, what we refer loosely as cryptocurrencies, are not currencies,” the finance minister said while clearing the air around cryptocurrencies at her post-Budget press conference. “We are not taxing the currency (digital rupee) that is yet to be issued by RBI. Everything that prevails outside of it, in the name of digital, are assets being created by individuals. And if profits are being made by transacting those assets, we will tax them at 30%.” She said government will keep a watch on the crypto world by imposing a 1% tax deducted at source (TDS) on every transaction.