Can You Offset Crypto Losses Against Profits?
The new tax rules impose a strict 30% taxation on cryptocurrency income. However, losses from transferring digital assets cannot be deducted from other profits. This approach differs from current tax laws, which allow long-term losses to offset long-term capital gains, reducing tax liabilities. Cryptocurrencies will be treated as a separate asset class under the new framework.
The inclusion of digital asset taxation signals India’s intent to regulate this sector. How “virtual assets” will be defined remains to be seen, with potential inclusion of NFTs and other digital assets alongside cryptocurrencies.
When Will This Be Implemented?
The Reserve Bank of India (RBI) plans to launch its digital currency, the Digital Rupee, on April 1, 2022, signaling the beginning of a new chapter in Indian financial history.
What Prompted India’s Change in Stance?
India’s shift towards cryptocurrency regulation is expected to impact economic growth positively. As one of the fastest-growing cryptocurrency markets globally, India’s crypto sector is valued at $15–20 billion, with a total market capitalization of approximately $6 billion.
The government intends to limit the use of private digital currencies while leveraging its partially convertible rupee to monitor market access. Cryptocurrencies’ inherent anonymity has raised concerns about financial stability and misuse for illicit activities like money laundering and fraud. The RBI aims to regulate digital money through these measures.
Is Cryptocurrency Now Legal in India?
Yes, the new tax system effectively legitimizes cryptocurrency transactions while enabling government oversight. This decision grants legal status to major cryptocurrencies like Bitcoin and Ethereum, earning praise from crypto enthusiasts.
When Will India’s Digital Rupee Be Issued?
The Digital Rupee, a central bank digital currency (CBDC), is slated for launch between 2022 and 2023 by the RBI. It will function as a legal tender, similar to paper fiat money, and will be underpinned by blockchain technology.
The CBDC represents a significant step in modernizing India’s financial system while ensuring compatibility with existing fiat currencies.
