India moving towards digital assets

1. Digital Rupee (Indian bitcoin)

A digital rupee is a digital currency that will be issued using blockchain and other technologies. Such a digital rupee will be issued by the Reserve Bank of India from the financial year 2022-2023. As quoted by the Finance Minister in his budget speech “The introduction of the Central Bank Digital Currency (CBDC) will give a major boost to the digital economy. The digital currency will also promote a more efficient and affordable currency management system”, issuing the Digital Rupee. It will change the entire process of transacting and this is a big step towards making it a completely digital economy.

Digital Rupee is a digital currency that can be stored in a digital wallet and is regulated by the Reserve Bank of India. India is one of the many countries that have introduced their own digital currency.

It is interesting to note that the cryptocurrency, the non-fungible token they are powered by the blockchain which keeps a record of all the transactions in a series.

With the introduction of Digital Rupee, the Finance Minister in his budget speech also announced that transfer of all virtual digital assets will be taxed at the rate of 30%.

From now on, it will not be wrong if we say that Digital Rupee is Indian bitcoin which will bring massive change in Indian economy.

2. virtual digital asset

So what are these virtual digital assets as far as taxation is concerned?

What is meant by Virtual Digital Assets?

(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, and may be transferred, stored or traded electronically;

(b) a non-fungible token or any other token of a similar nature, by whatever name called;

(c) any other digital asset, as the Central Government may, by notification in the Official Gazette, specify—

The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, any income arising from transfer of any virtual digital asset will be taxable at the rate of 30% in the hands of the recipient.

Further, with the inclusion of virtual digital assets in the purview of taxation, the following tax-qualifying provisions have been made in respect of them:

• No deduction shall be allowed in respect of any expenditure or allowance while computing that income other than the cost of acquisition.
• Also, loss arising from transfer of virtual digital assets cannot be set off against any other income.
• TDS will be deducted on payments made in respect of transfer of virtual digital assets at the rate of 1% of such consideration above a monetary limit.
• Also, gifts of virtual digital assets will be taxable in the hands of the recipient.

What’s more to share on digital assets and digital currencies?

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