Govt has Sovereign Right to Tax Profits from Crypto Assets: FM

Finance minister Nirmala Sitharaman on Friday said the government has the sovereign right to tax profit made from cryptocurrency transactions but is yet to decide on whether to legalise crypto assets or ban them.

In her reply the discussion on the Union Budget 2022-23 in the Rajya Sabha, she also said the budget stood for continuity and sought to bring stability to the pandemic-hit economy along with predictability in taxation.

“I am not going to legalise it (crypto assets) or ban it at this stage. Banning or not banning will come subsequently, when consultations give me input,” she said.

It is a different question whether cryptocurrency is legitimate or illegitimate, she said, “but I will tax (profits from transactions) because it is a sovereign right to tax.”

er statement comes after Reserve Bank of India governor Shaktikanta Das flagged the central bank’s concern over legalizing cryptocurrencies.

Private cryptocurrencies were a big threat to the country’s financial and macroeconomic stability, and would undermine RBI’s ability to deal with issues related to financial stability, Das had said post monetary policy announcement on Thursday.

“I think it is my duty to tell investors that when they are investing in cryptocurrencies, they should keep in mind that they are investing at their own risk. They should keep in mind that these cryptocurrencies have no underlying (asset) not even a tulip,” he said.

RBI in understood to have supported a ban on these assets.

Sitharaman in the budget proposed a 30% tax on gains made from any private virtual digital assets from April 1. The budget has also proposed a 1% TDS on payments towards virtual currencies beyond Rs 10000 in a year and taxation of such gifts in the hands of the recipient, in a move seen by industry players as a step towards granting legitimacy to these products.

Sitharaman put a strong defence of the budget, which she said stood for continuity and relied on capital penditure to lift growth. She said pital spending had a higher multiplier effect as compared to revenue expenditure, hence, the government had increased public capital spending to boost the economy.

“The objective of the budget is a stable and sustainable recovery in the economy,” she said, adding that the budget continues with the focus on growth initiated last year.

The finance minister said there is no question of slowdown or recession, citing estimated 9.2% GDP growth in the current fiscal.

She rejected the opposition’s criticism of high prices, saying the government has managed inflation better than the previous UPA government and only on six occasions have it breached the tolerance level of 6% since 2014 as compared to 9.1% post 2008 global financial crisis.

“A smaller crisis you could not handle with very experienced finance ministers and I was mocked at, saying, would you know anything at all,” she said.

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