Pvt crypto will never be legal tender: Govt a day after proposing tax on gains from virtual assets

Union Finance Minister Nirmala Sitharaman on Tuesday announced the government’s decision to bring cryptocurrency transactions under the tax net during the presentation of Union Budget 2022-23. Replying to a question in the post-budget media briefing, Sitharaman clarified that the proposed tax will be levied on any income from the digital assets and the government has not taken any stand on the legality of cryptocurrencies per se.

However, Finance Secretary TV Somanathan on Wednesday put an end to speculations and said that the government has no intention of declaring private cryptocurrencies as legal tender. The Finance Secretary was quoted by ANI as saying, “Bitcoin, Ethereum or NFT will never become legal tender. Crypto assets are assets whose value will be determined between two people. You can buy gold, diamond, crypto, but that will have not have the value authorization by govt.”

Following are the proposals aimed at taxing income from crypto assets, and their transactions:

• The Finance Minister on Tuesday proposed that income from the transfer of any virtual digital asset be taxed at a rate of 30 per cent.

• Nirmala Sitharaman also announced the imposition of 1 per cent TDS on payment made in relation to the transfer of virtual digital assets. The move is aimed to capture the transaction details in digital currency.

• She also announced that gifts in crypto assets shall be taxed. “Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient,” the Finance Minister said.

The proposed tax regime for virtual assets will come into effect from April 1 after the Parliament passes the Union Budget 2022-23..