Does Implying Taxes On Crypto Makes It Legal? Can Murder, Rapes & Drugs Also Be Made Legal If Citizen Pay Taxes On Them? Why Is Modi Led BJP Government So Money Minded?
Does implying taxes on crypto make it legal?
The trend of investing in cryptocurrency is growing. Exchanges today have millions of users.
This year’s budget was announced on 1st February by the Finance Minister Nirmala Sitharaman wherein she announced to propose 30% tax on income from transfer of cryptocurrency (including NFT’s) and decision to impose a 1% (TDS) tax deduction at source, related to the transactions above a monetary threshold.
Nirmala Sitharaman, however, that taxing of cryptocurrencies should not be seen as the government making crypto legal or recognizing these cryptocurrencies. “A process of consultation is going on about crypto whether to legalize it or not. That is the first thing. Before the completion of consultation, I won’t be able to do anything on regulating them or formalizing a framework for regulation for them,” Nirmala Sitharaman stated in an interview.
Nirmala Sitharaman has time and again emphasized on the fact that the digital assets are not yet considered to be legal and/or are not recognised by the Government of India, yet the government decided to imply a huge tax of 30% on something not considered legal yet.
On 11th February Sitharaman said that banning or not banning cryptocurrencies will come subsequently after consultations. She also replied on the 2022-23 Budget in which, Ms. Nirmala Sitharaman stated, “The government of India has sovereign right to tax any kinds of profit which also includes profit made from cryptocurrency transactions, rest about that legal aspect, something can be done only based on the feedback from consultation. Till the final approval I’m not doing anything to legalize or ban cryptocurrencies at this stage. We have only taxed the profit emanating from the transactions.”
In the Budget 2022-23 speech, the Finance Minister, Nirmala Sitharaman had also mentioned that Reserve Bank of India (RBI) will introduce a digital rupee, backed by blockchain technology this year itself.
“I will tax because it is a sovereign right to tax” said Nirmala Sitharaman.
When the question of legalizing cryptocurrency came up, the finance minister said: “Whether it is legitimate or illegitimate, that it is a different question altogether, but I will tax because it is a sovereign right of the government to tax.”
It was also announced in the budget that the Reserve Bank of India (RBI) will issue a new digital rupee in year 2022-23 using blockchain and other such technologies.
On 10th February the governor of RBI made an announcement that private cryptocurrencies are a threat to macroeconomic and financial stability.
Sitharaman also added saying that “Introduction of Central Bank Digital Currency (CBDC) by the RBI will give a big boost to the digital economy,” ” having digital currency will also give us a more efficient and cheaper currency management system in India.”
In a monetary policy press conference, RBI governor Shaktikanta Das said private cryptocurrencies are a threat to macroeconomic and financial stability and investors, who are investing at their own risk, should keep risks in mind.
“Private cryptocurrencies or virtual currencies or whatever name you call it are a threat to our macroeconomic stability and financial stability. These private cryptocurrencies will undermine the RBI’s power to deal with issues of financial stability and macroeconomic stability,” Das (RBI governor) told reporters.
Informing the investors of India, the governor said such assets have no underlying value whatsoever, “not even a tulip”. The growing popularity and trend of cryptocurrencies is often put at an equal level with the Tulip Mania that gripped parts of Europe, especially Holland, in the 17th century, which ended in a spectacular crash.
“This digital rupee that RBI is planning to launch will be exactly like normal, physical currency like rupee,” said RBI’s currency Deputy Governor T Rabi Sankar. “Government is still working on Central Bank Digital Currency. Once the law that is proposed, is amended, we can move ahead with our proofs of concept and pilot projects,” Sankar added.
The RBI governor has said on multiple occasions and has flagged the concern about financial stability. The main problem is that individuals can start borrowing through their credit cards and take personal loans and invest in cryptocurrencies. If they go down very sharply, those banks will be faced with NPAs (Non performing assets) if they crash.
In the Financial Stability Report (FSR) that was published on December 29, the RBI put forward various problems on private cryptocurrencies.
The report stated that these instruments like crypto pose immediate risks to customer combating the financing of terrorism (CFT) protection and anti-money laundering (AML).
These customers are also prone to many kind of frauds and to utmost price volatility, given that cryptocurrency is highly speculative in nature. Longer-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution,” the report stated.
Not only this, the proliferation of private cryptocurrencies across the world has led regulators and governments being exposed to the associated risks, the FSR report said.
It has been emphasized by the Finance Minister that legality of cryptocurrencies has not been decided yet but they are still made taxable by the government the grounds of which have not been explained. It has been left like an open conversation saying “I will levy a tax because it’s a sovereign right to tax”. On what grounds, on what basis, the question is can something that might be declared illegal in India later on be taxed today?
Can such a similar case happen with drugs in India. Being something illegal it is still a part of the country. Can taxes be levied on drugs?
There is a difference in statements of the officials of India. According to the RBI governor cryptocurrencies pose a threat to the economy and are a risk for the investors of India.
Then why tax something that is a risk to the economy. Why is there such a huge tax of 30%?
The situation in India about cryptocurrencies is very unclear right now. There are a lot of questions that still need to be answered and a lot of confusion is still there in the mind of both the investors and general public. This enigma will be solved once the government of India has a clear stance on the legality of these digital assets.
