One of the most striking moves in the Union Budget’s taxation proposals for 2022-23 is the introduction of a taxation regime for virtual digital assets — evolving manifestations of crypto currencies, codes and non-fungible tokens.
The government has proposed to issue a Digital Rupee, or Central Bank Digital Currency (CBDC), in the fiscal year 2022-23. Additionally, the Budget also proposed imposing a tax of 30 per cent on virtual assets, effectively legitimising trading of private crypto currencies and non-fungible tokens. This is broadly in line with the Centre’s plans to have a fiat digital currency, while disallowing use of private virtual coins as legal tender.
About Virtual Digital Assets
- As per the proposed new clause, a virtual digital asset is proposed to mean any information or code or number or token (not being Indian currency or any foreign currency), generated through cryptographic means.
- Virtual digital assets have gained tremendous popularity in recent times and the volumes of trading in such digital assets has increased substantially.
- Virtual Digital Assets also include Non-fungible tokens or NFTs , which are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.
- NFTs can also be used to represent individuals’ identities, property rights, and more.
With the introduction of Central Bank Digital Currency (CBDC), India’s digital economy will witness a significant boost. Central Bank Digital Currency (CBDC) will give a big boost to the digital economy.
Digital currency will also lead to a more efficient and cheaper currency management system. Earlier in October 2021, the Reserve Bank of India (RBI) received the nod for an amendment to the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form.
Virtual currencies are digital representations of value that can exist only in electronic form. Their transactions occur on online networks or the Internet. Examples of virtual currencies include tokens and cryptocurrencies. Virtual currencies are a novel form of currency and, as such, are mostly unregulated. But that situation is changing, and an increasing number of government agencies and countries are considering the implications of introducing virtual currencies into their economies.