India’s finance minister has stated that a digital version of the rupee will be introduced this year.
Nirmala Sitharaman announced intentions for a 30% tax on revenue from digital assets in her annual budget statement.
Profits from trading or transferring cryptocurrencies and non-fungible tokens would be taxed at the highest rate in the country.
As China tests the digital yuan, India is the next large nation to launch an official virtual currency.
“The introduction of a central bank digital currency would give (the) digital economy a huge boost,” Ms Sitharaman said on Tuesday.
“Digital currency will also result in a more efficient and cost-effective currency management system,” she continued.
The size and frequency of digital asset transactions, according to Ms Sitharaman, “has made it vital to provide for a specialized tax framework,” where gains from transactions are taxed.
The tax would also apply to digital asset gifts, with receivers paying for the fee. All additional taxes would be deducted at the point of sale.
Ms. Sitharaman made the statement while presenting the Indian federal government’s annual budget.
It includes increased infrastructure expenditure as well as financial guarantees for struggling small companies.
The epidemic has wreaked havoc on Asia’s third largest economy, resulting in massive job losses and soaring prices.
The move by India’s central bank to launch a digital currency comes in the wake of the country’s controversial demonetisation program.
Prime Minister Narendra Modi gave only four hours’ warning before withdrawing 500 rupee (£4.94) and 1,000 rupee banknotes from circulation in 2016.
Meanwhile, China is experimenting with the digital yuan and has outlawed cryptocurrency trade and mining ahead of the Winter Olympics this month.
The Bank of England and the Treasury in the United Kingdom are investigating the possibility of a central bank digital currency.
Cryptocurrency traders applauded India’s intention to launch a digital rupee.
The project, according to Sumit Gupta, co-founder and CEO of India-based cryptocurrency exchange CoinDCX, “has provided validity to virtual digital assets.”
Mr. Gupta also feels that taxing digital assets would be beneficial to the market, but that the rate is too high.
“A 30 percent tax rate is comparable to that levied on income from speculative activities such as lottery, gambling, and other games. The recommended 30% might function as a deterrent to larger amplification “”It’s a possibility,” he explained.