New Delhi: Cryptocurrencies like Bitcoin or Ethereum will never become a legal tender, says Finance Secretary TV Somanathan, adding that only the digital rupee issued by the RBI would have that enviable status.
Speaking to ANI, the Finance Secretary said, "Digital rupee will be backed by the RBI which will never default. The money will be that of the RBI but its nature will be digital. We can purchase non-digital assets with the digital rupee as we purchase an ice cream or other things using our wallet or payments through UPI platform."
Somanathan explained that crypto assets are those whose value is determined between the demand and supply interface between two people: you can buy gold, diamond or any other asset, but that value will not have the authorisation of the government.
People investing in private cryptos should understand that it does not have the authorisation of the government. There is no guarantee that your investments will be successful or not; one may lose money and the government is not responsible for this, he said.
The Finance Secretary, however, clarified that things which are not ‘legal’ are not necessarily illegal.
"I am not saying that Bitcoin or Ethereum is illegal, but these are not illegal either. But I can say that even if crypto currency is regulated, then also it will not be a legal tender," said Somanathan.
The Finance Secretary also cleared the air on the 30 per cent tax on digital assets transfer. He said except agriculture, all other income is taxable as per the government policy.
"Currently we don't have clarity on crypto currency: Whether it is business income, capital gain, or it is a speculative income? Some people declare their crypto assets, others do not. Now, from April 1, 2022, a uniform rate of 30 per cent tax will apply on the transfer of digital assets," he said.
"This is not just for crypto; this is for all speculative income. For example, if I take to horse racing, that also attracts 30 per cent tax. There is already 30 per cent tax on any speculative transaction. So, we have decided to tax crypto at the same rate. Crypto is a speculative transaction, so we are taxing it at a 30 per cent rate," said Somanathan.
"No one knows the real value of Ethereum. Their rate daily fluctuates,’’ he added.
SEPARATE COLUMN IN I-T RETURN ON ANVIL
Income tax return forms from next year will have a separate column for making disclosures on gains made from crypto currencies, Revenue Secretary Tarun Bajaj said on Wednesday. He added that the government is working on a legislation to regulate crypto currencies, but no draft has yet been released in public. Meanwhile, the RBI-backed digital currency will start circulating in the next fiscal. The Budget has also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act. The provisions related to 1 per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1.
Also, no deduction in respect of any expenditure or allowance shall be allowed while computing income from transactions in such assets. Also, losses from the transfer of virtual digital assets will not be allowed to be set off against any other income.
