In addition to launching a digital currency over the next two years, Indian authorities have chosen to impose a tax on cryptocurrency transactions.
The news were announced by Finance Minister Nirmala Sitharaman during her speech at the Union Budget 2022. She stated that the government would levy a 30% tax on profits derived from the transfer of a digital asset.
This would affect non-fungible tokens (NFTs), which have recently gained popularity in India, in addition to cryptocurrencies.
"While computing such income, no deduction in respect of any expenditure or allowance shall be permitted save cost of acquisition," Sitharaman stated.
"Moreover, any loss resulting from the transfer of virtual digital assets cannot be offset against any other revenue."
A few additional practical details were also addressed by Sitharaman. For instance, the government could impose a 1% TDS on payments made in connection with the transfer of virtual digital assets. In the case of gifts of virtual digital assets, the recipient bears the burden of taxation.
Rupees in digital form
During her speech, Sitharaman also stated that the Reserve Bank of India will issue a new digital rupee based on blockchain technology between 2022 and 2023.
"Digital currency will also result in a more efficient and cost-effective currency management system. It is consequently recommended that the Reserve Bank of India create digital rupees utilizing blockchain and other technology beginning in 2022 and 2023."
India isn't the only country planning to establish a CBDC in the coming year. While no country has yet to create a wholesale CBDC that would primarily be used for payments by central banks, China has made the most progress thus far.
It plans to launch the digital yuan later this month in time for the forthcoming 2022 Winter Olympics.
Meanwhile, a few smaller, more developing economies, such as Nigeria, the Bahamas, and five other Caribbean islands, established retail CBDCs last year.