Taxing cryptocurrency is government's sovereign right: FM Sitharaman
Finance Minister Nirmala Sitharaman on Friday said the government has sovereign right to tax profit made from cryptocurrency transactions. She also said the decision on banning or legalizing cryptocurrencies would be taken based on feedback from the consultations. "(Whether it is) legitimate or illegitimate, it is a different question, but I will tax because it is a sovereign right to tax," Sitharaman said.
- Notably, the 30% tax on cryptocurrency income, announced by Sitharaman in Budget 2022, has invoked mixed reactions from Indians.
- While some claim that with the 30% rate, the government has put it at par with betting and speculation, others call it an easy choice compared to a complete ban.
- Currently, there is no ban or regulation on the use of cryptocurrencies in India.
Despite the high tax, the crypto industry welcomed the government's move as it gave some kind of legitimacy to India's crypto ecosystem. "By bringing in taxation, the government legitimizes the industry to a large extent," Nischal Shetty, the CEO of WazirX, had said on the budget day. However, Sitharaman's latest comments contradict the high hopes of the crypto industry.
Meanwhile, during the Monetary Policy Committee announcements on Thursday, Reserve Bank of India Governor Shaktikanta Das said, "Private cryptocurrencies are a big threat to India's financial and macroeconomic stability, along with RBI's ability to deal with the same." He also told cryptocurrency investors that "they are investing at their own risk." "These cryptocurrencies have no underlying asset," he added.
In 2018, RBI had directed financial institutions to break all ties with individuals and businesses dealing in cryptocurrencies. But the direction was reversed by the Supreme Court in 2020 as it violated the freedom of trade guaranteed by India's Constitution.
Notably, the Centre failed to bring a cryptocurrency bill for discussion in Parliament despite listing it twice last year. After listing it for the second time, Sitharaman had said the new crypto bill is most definitely different from the 2019 proposal, which took a very hard stance against crypto. Reportedly, the crypto bill continues to be stuck at the Cabinet approval level.
