Budget 2022: Crypto gets a backdoor entry in India
On February 1, while announcing the Budget 2022, Finance Minister Nirmala Sithraman announced something that was totally unexpected. Sithraman said income from 'virtual assets' will be taxed at 30% and one percent TDS (tax deducted at source) will be deducted on these investments. The government defines virtual assets as any instrument, generated through cryptographic means providing a digital representation. In simple words, it includes all private crypto currencies.
True, the 30% taxation is punitive tax, a harsh levy that could discourage many in dealing in such assets. But, for an industry which was fearing a countrywide ban at one point, permission to exist even with a punitive tax rate is a blessing. The bigger takeaway from Sitharaman’s Budget statement is not the rate of tax but the fact that crypto assets have finally got recognition in India. By recognising crypto as a taxable asset, the government has acknowledged its existence along with other virtual assets. The legality of the crypto assets can still be debated. But logically how can a government tax something that is illegal?
Secondly, by doing so, the government has also ignored the repeated public warnings by the RBI on crypto assets. To understand this point, let’s first look at why the RBI was opposing crypto in the first place.
In the Financial Stability Report (FSR) released on December 29, the RBI highlighted several concerns on private cryptocurrencies. It said these instruments pose immediate risks to customer protection and anti-money laundering (AML) and combating the financing of terrorism (CFT).
“They are also prone to frauds and to extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow
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