'Sovereign right' to tax: This is what Nirmala Sitharaman said about India's cryptocurrency tax in parliament

India's finance minister, Nirmala Sitharaman said on Friday that the government has the sovereign right to tax profit made from cryptocurrency transactions. She added that the decision on banning or not banning will be taken depending on feedback from consultations.

In response to the general discussion on the country's Union Budget, the minister said, "I am not going to legalise it or ban it at this stage. Banning or not banning will come subsequently, when consultations give me input".

When asked about the profits derived from cryptocurrency transactions, she stated that "(Whether it is) legitimate or illegitimate, it is a different question, but I will tax because it is a sovereign right to tax".

The minister was responding to questions raised by Congress member Chhaya Verma about cryptocurrency, who had asked about the legitimacy of taxing cryptocurrency.

In her budget speech on February 1, Sitharaman announced that as of April 1, only the RBI-issued 'Digital Rupee' will be recognised as currency, and the government will levy a 30 per cent tax on gains from any other private digital assets.

The Budget 2022-23 proposes a 1 per cent TDS on payments towards virtual currencies in excess of Rs 10,000 per year, taxation of such gifts in the hands of the recipient.

TDS would be subject to a limit of Rs 50,000 annually for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.

In addition, no deductions in respect of any expenditure or allowance shall be allowed when computing income from transactions in such assets. It has also been stipulated that losses from the transfer of virtual digital assets will not be able to be set off against other income.

The provisions relating to 1 per cent TDS will take effect on July 1, 2022, while from April 1, 2022, gains will be subject to tax.