How 30% Tax On Crypto Income Will Impact Retail Investors?

In her budget statement today, the finance minister stated that cryptocurrency will be taxed at 30%. Any income derived from the transfer of a virtual digital asset will be subject to a 30% tax. There are no allowances for deductions or exemptions. Losses incurred as a result of the transfer of such assets cannot be offset against other sources of income. India aims to tax cryptocurrency transactions at a rate of 30%, according to the finance minister and owing to the same Mr. Archit Gupta, Founder and CEO, ClearTax said that "Government has brought in 30% tax on cryptos income, where no deduction for any expenses except cost of acquisition shall be allowed. Gift of virtual assets shall also be taxed for the recipient. This clears the air on taxes for cryptos, however, there are several types of incomes people earn from cryptos and hopefully, more clarity will be available in the Budget documents."

Suraj Malik, Senior Advisor, Private Clients, Funds & M&A tax at Burgeon Law has claimed that "Budget proposals reinforce the government agenda for inclusive and sustainable growth and are targeted at making the Indian economy resilient and vibrant. Allocations and reforms targeted at productivity enhancement, governance and digitisation will unleash the growth engine to make India a global force. Budget 2022 spells out the Government's agenda to drive growth and inclusive development beyond just a year and is a manifesto of the vision for India for the next decades. New Policies permitting battery swapping for EVs, increased use of drones, digital currency using blockchain and incentives for startups and venture capital should bring in traction to the entire start-up ecosystem that is the frontrunner for innovation and emerging technologies."

He further added "The tax regime proposed for cryptos & NFTs equates it to speculative income as against a financial asset. Additionally, the proposed TDS regime will bring in some operational hurdles that the exchanges will need to implement. Tax benefits to manufacturing companies and startups, coupled with a lower effective tax rate (due to reduction in surcharge) on capital gain for Investors at exit will make investments more attractive for Angel Investors and Private Equity investors."

The budget attempted to address all sectors while also emphasising job formation and technological advancements. It maintains a growth-oriented strategy, with the finance minister announcing some major capital investment across sectors, as well as an emphasis on infrastructure and education, which really is a favourable thing this year. Owing to the same Mr. Harshad Chetanwala, Co-Founder- MyWealthGrowth.com. has said "The increase in capital expenditure across sectors and the focus on infrastructure and education are big positives of this budget. The budget has tried to cover all the sectors and also laid emphasis on job creation and technology. It continues with the growth-oriented approach which is more like taking ahead of the previous year's budget."

He further stated "The tax of 30% on Virtual Digital Asset along with 1% TDS on transfer and no set-off for losses is something that directly impacts avenues like cryptocurrencies and NFT. Many retail investors have been investing in these assets by just looking at high returns potential. The taxation part may work as some sort of roadblock as these virtual digital assets continue to remain unregulated."

Union Finance Minister Nirmala Sitharaman also discussed implementing the "One Nation, One Registration" system in her Budget 2022 presentation to enhance freedom of living and doing business. Mr. Harshad Chetanwala has stated in response to the declaration that "One Nation, One Registration' that will facilitate anywhere registration to facilitate ease of doing business will be helpful to many existing and upcoming businesses, thus encouraging more domestic and international investors to invest in India."