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India to adopt digital rupee and slap a 30 per cent tax on cryptocurrency income
Designates data centres as infrastructure to attract more outside investment
India's government has ordered its Reserve Bank to have a digital rupee into circulation by next year, and outlined plans to raise revenue with a 30 per cent income tax on cryptocurrency and non-fungible tokens.
The two plans were announced yesterday by finance minister Nirmala Sitharaman as she revealed the nation's budget for 2022.
The crypto tax is the first item listed in a section of the budget memo headed "Revenue Mobilization". The document [PDF] explains that India wants to tax income from crypto-assets at a 30 per cent flat rate.
By comparison, India currently taxes short-term capital gains made by selling shares at 15 per cent. The budget memo also calls for a one per cent tax on sales of cryptographic assets, payable by parties to the transaction, to widen India's tax base.
Another crypto-related initiative removes the possibility of tax deductions for losses incurred by crypto traders. Again, that plan is mentioned as a revenue-raising initiative.
India's budget projection [PDF]for tax receipts in the coming financial year lacks a line item for the new crypto taxes. The Register will pursue the matter.
The plan for a digital currency calls for it to be operational this financial year. In her budget speech, minister Sitharaman said the introduction of a digital rupee will "give a big boost to digital economy" and "lead to a more efficient and cheaper currency management system."
Just how the currency would be implemented, or used, was not explained – other than with a brief reference to it being powered by "blockchain and other technologies". If the digital currency is issued in FY 2022-23 as planned, India would be one of a handful of nations with an operational central bank digital currency.
Nigeria and the Bahamas currently offer their currencies in digital form, while China is conducting a large-scale pilot. Other pilots are ongoing, but at a smaller scale. India is, however, trying to digitise almost all the nation's affairs so a digital rupee is not a radical step.
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One way to make the digital rupee viable is ensuring all Indian villages enjoy excellent internet connectivity so they can use it instead of cash. Accordingly, the budget contains new spending to roll out optical fibre to more locations. The budget also calls for the introduction of a national digital health platform and public-private-partnerships to help farmers adopt digital technology.
Drones for farmers are also on the agenda, along with programs to foster drone start-ups and create Drone-as-a-Service operations.
Another tech-related announcement was the inclusion of datacentres and energy storage systems such as grid-scale batteries on India's "harmonized list of infrastructure". This designation means both types of facilities are officially considered infrastructure by the government, so sovereign wealth funds or pension funds receive a tax holiday on any dividends or capital gains if they invest in the sectors.
Back to crypto: major cryptocurrency values rose slightly over the last 24 hours, so investors may not see India's plans as something to fear. Nonetheless they may be caught off guard, because India had previously floated the idea of a crypto ban. India's proposed taxes may be unusual in a global context, but the budget plan means a colossal market will remain able to buy and sell digi-dollars and/or digital certificates of ownership to JPEGs. ®