The finance minister began talking about cryptocurrency. There was an acceptance of the phenomenal rise in transaction volumes. She quickly added that tax schemes were needed. This was clearly a positive sign as it would bring clarity to investors and other stakeholders. It was, however, a sign of what is to come in the long-awaited Bill during monsoon season. It is interesting that cryptocurrencies were also mentioned in the Budget papers as virtual digital assets. This indicates that the Bill will treat them as an asset, a commodity, and not as legal fiat or currency.
Then, the punch was delivered – a flat 30 percent tax rate was proposed. It also included a number of conditions. This flat tax rate has many implications. For one, irrespective of the income slab, one will have to pay 30 percent on all the gains from cryptocurrencies/virtual currencies, as one calls it. It is important to remember that this tax, which would apply to all taxpayers, is quite unpractical. Because the majority of people don’t pay any taxes. They fall under the tax-free threshold or have pay rates of either 10 percent or 20 percent. The Union Budget makes cryptocurrencies not only unviable but also unattractive to the middle class who want to make extra money taking on more risk.