Only RBI can issue Digital Currency, rest are assets and attract 30 pc tax: Sitharaman

The government is working on a legislation to regulate private cryptocurrencies and crypto watchers had pointed at policy uncertainty over taxing digital assets.

She said the tax on digital assets transcations had to be announced even before a law is introduced.

"I don't wait till regulations come in place for taxing people who are making profits. Can I?" Sitharaman told reporters at a media briefing after her Budget speech in parliament.

Sitharaman made it clear that anything outside of what is issued by the RBI will be treated as digital assets and not digital currency.

"I said the Reserve Bank (of India) will be issuing a digital currency. A currency becomes, or, a currency is a currency only when it is issued by the central bank, even if it is crypto. Anything outside of that, even loosely all of it referred to as cryptocurrencies, they are not currencies," Sitharaman was quoted as saying by NDTV.

Asked about the new tax (30 percent levied on digitalassets transactions), Sithraman said it will be implemented only on profits made on digital assets and it is not applicable on "currency that is yet to be issued."

"Let's first understand we are not taxing currency that is yet to be issued. And that provision has been now made and the currency in the name of digital rupee will be issued. Exact name you will get a bit later, but the Reserve Bank is the one who is going to issue it. And what Reserve Bank issues is the digital currency. Everything outside of it in the name of digital whatever are assets being created by individuals," the Finance Minister said, according to the NDTV report.

"And in transacting those assets if there are profits being made, we are taxing that profit at 30 per cent... There will be a 1 per cent TDS (tax deducted at source) in every transaction in the crypto world. So, the distinctions are very clear. Currency is with the Reserve Bank. That will get issued sometime this year. The transactions happening in the crypto world are of different kinds of assets and for that, every transaction gets taxed," Sitharaman said.

The government has taken a serious note of the unregulated crypto market operating in the country and geared up to frame new laws, whic were expected to be presented in the winter session of the parliament.

Cryptocurrencies were banned by RBI in 2018, following a rise in fraudulent transactions leading. The ban was removed by the Supreme Court two years later and the market has flourished since, growing 650 percent in the year to June 2021 - second only to Vietnam, according to research by blockchain data platform Chainalysis.

Last year, Prime Minister Narendra Modi had cautioned against Bitcoin, saying that it posed a risk to younger generations and could "spoil our youth" if it ended up "in the wrong hands".