India Embraces Bitcoin, Crypto. But there is a catch

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Crypto is now legal in India. The country will impose a 30% tax on income from cryptocurrencies and other digital currencies, officials said, which will put them in the highest tax bracket.

Finance Minister Nirmala Sitharaman made the announcement Tuesday when presenting the budget.

The tax would also apply to donations of digital assets, with recipients required to pay the tax.

“The government will also follow the money trail in crypto transactions and each transaction will be charged 1% TDS,” Sitharaman said, referring to withholding tax.

She also said the central bank will introduce a digital currency in the next fiscal year using blockchain and other supporting technologies.

Sitharaman said the introduction of a central bank digital currency would give a boost, a big boost to the digital economy.

“Digital currency will also lead to a more efficient and cheaper currency management system,” she added.

Industry estimates suggest there are 15-20 million crypto investors in India, with total crypto holdings of around 400 billion rupees, or $5.37 billion, according to Reuters .

‘Welcome Move’

The announcement contrasts with that of November, when the Indian government announced that it was introducing a bill during its winter parliamentary session to ban private cryptocurrencies.

“The bill “would allow certain exceptions to promote the underlying cryptocurrency technology and its uses.”

President Narendra Modi said cryptocurrencies can endanger local youth and pose “serious concerns about macroeconomic and financial stability”.

However, a week later, officials said that instead of banning cryptocurrencies, the government planned to regulate them as an asset class instead.

A Cabinet memo circulated to the Indian government says cryptocurrency will be regulated rather than banned.

The reaction on social media seemed generally favorable with a poster on Twitter saying that “by introducing taxation on crypto, India has indirectly legalized it”.

“A 30% tax is nothing,” he said. “It’s roughly a day move in the crypto welcome move.

“Even though the #budget has addressed India’s #crypto tax concerns, some things are not well thought out,” another said. “If no compensation or expense is allowed, it’s going to be terrible for miners. It will discourage the industrial aspect of the ecosystem.”

China banned cryptocurrency last year, but the country is allowing some cities and entities to try out blockchain apps.

Bitcoin was down 3.54% at $37,475 at last check.

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