India to Release Blockchain-based CBDC Digital Rupee by FY 22-23, Announces 30% Crypto Tax

Indian Finance Minister Nirmala Sitaraman made some big announcements during the budget session earlier today on February 1. Firstly, India will being its own central bank digital currency aka the Digital Rupee in the financial year 2022-23.

The finance minister said: "Introduction of a central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system”.

India’s digital Rupee will be powered by the blockchain technology controlled by the central bank. This shows that the Indian government is slowing warming up to the digital currency technology.

Informing India’s lower house Loksabha, the MoS finance noted: "The purpose of creating a digital currency is to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs and reduced settlement risk”.

The minister further added that the introduction of Digital rupee will lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. The government officials said that they will also be taking care of all the risks that come along with introducing a digital currency.

Furthermore, the Indian central bank has been mulling on introducing a ban on private cryptocurrencies. However, instead of taking this drastic measures, the Indian Finance Minister announced taxes on profits derived from trading crypto assets.

The Indian government has decided to levy 30% tax on cryptocurrencies, putting them under the highest tax slab in the country. “There has been a phenomenal increase in transaction in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” said the Indian Finance Minister.

Interestingly, the Finance Minister also noted that losses in crypto assets cannot be offset against any other asset class. Furthermore, investors cannot carry forward the losses in the subsequent financial year.

There’s been a huge participation from India in the crypto market following the pandemic. As per industry estimates there are currently 15 million to 20 million crypto investors in India. The collective crypto holding of all these investors currently stands at 400 billion rupees ($5.37 billion).