Crypto Budget 2022: Finance Minister Nirmala Sitharaman announced the government's intent to introduce a digital rupee in her Union Budget 2022-23 speech on February 1, 2022. The Finance Minister announced that the digital currency or digital rupee will be introduced by the central bank of India using block chain and other technologies.

The RBI Digital Currency will be issued starting from 2022-23 fiscal year. FM Sitharaman stated that the introduction of the central bank digital currency will give a huge boost to the economy.

What is RBI Digital Currency?

The RBI Digital Currency will be the same as the liquid cash we hold in our wallets and banks, except it would be in a digital form. The digital rupee introduced by the RBI will be held in a digital wallet, under the supervision of the central ban. 

Will Digital Currency replace Physical Cash?

The introduction of digital rupee does not mean phasing out of physical cash, as it will continued to be used by people and banks. The people who are interested in owning digital rupee may be given the option of converting their deposits in the banks into the new RBI digital rupee.

RBI Digital Currency Significance

The announcement of the introduction of RBI digital currency is extremely significant as it comes at a time when there is an increase in the demand for private cryptocurrencies such as bitcoin. 

The government approved digital currency will enable those who are hesitant in investing in private cryptocurrencies given the risk factor involved, to feel more secure while investing. 

Further, the cost of issuing digital currencies will be far lower than the cost of incurred during printing and distribution of physical cash. The RBI would be able to create and distribute the digital rupee at almost zero cost. 

The introduction of the digital rupee may bring down the use of physical cash, in line with PM Modi's vision of creating a digital India. 

Digital currency will also reduce instances of corruption and fraud as the digital rupee will be monitored by RBI and hence can be easily tracked. 

Tax on crypto in India

Under taxation of virtual / digital assets, FM Nirmala Sitharaman made the following announcements:

Any income earned from the transfer of virtual digital assets shall be taxed at a rate of 30 percent.

There will be no deduction in respect of any expenditure or allowance while computing such income, except cost of acquisition.

The loss from transfer of virtual assets shall not be set-off against any other income.

The gift of virtual assets shall also be taxed in the hands of recipients. 

1 percent TDS (tax deducted at source) has been proposed on transactions in such asset classes above a certain threshold.