New Delhi: Union Finance Minister Nirmala Sitharaman has clarified that ‘banning or not banning cryptocurrencies’ will be taken after consulting with all stakeholders concerned.

Ms. Nirmala Sitharaman  replying to a debate on Budget in the Rajya Sabha said that the government has sovereign right to tax profit made from cryptocurrency transactions, and banning or not banning cryptocurrencies in India will come subsequently after consultations.

“Banning or not banning cryptocurrencies will come subsequently after consultations. Not doing anything to legalise or ban cryptocurrencies legitimate or illegitimate, it is a different question,” Sitharaman said

Taxing the virtual assets does not mean that the government is legalising it. “Not doing anything to legalise or ban it at this stage," Sitharaman clarified. In the Budget , she levied 30% tax on gains from the virtual assets like cryptocurrency.

She proposed of levying tax for virtual digital assets at a flat rate of 30% irrespective of the individual’s income tax slab rate. In addition, a 1% tax deducted at source (TDS) will be applicable on transfer of such assets over a certain threshold.

Also, no deduction in respect of any expenditure or allowance shall be allowed while computing income from transactions in such assets. It has also specified that losses from the transfer of virtual digital assets will not be allowed to be set off against any other income, she clarified the questions raised by the members.

The minister was answering the quarries raised by the Congress member Chhaya Verma on cryptocurrency. Verma had asked about the legitimacy of taxing cryptocurrency.

In the Budget, Nirmala Sitharaman has proposed to introduce digital currency or Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India (RBI) starting 2022-23. Introduction of Central Bank Digital Currency (CBDC) to give a big boost to digital economy, leading to a more efficient and cheaper currency management system, she stated in the Budget.

In her Budget speech on February 1, Sitharaman had said that only RBI-issued ‘Digital Rupee’ will be recognised as currency, and the government will levy a 30 per cent tax on gains made from any other private digital assets from April 1.

Reserve Bank of India (RBI) governor Shaktikanta Das said private cryptocurrencies are a threat to macroeconomic and financial stability, and undermine its ability to deal with challenges on two fronts.

Mr. Das also warned investors that they must remember cryptocurrencies have no underlying asset, “not even a tulip”. He was probably alluding to tulip mania of the 17th century, when contract prices for tulip bulbs shot up to extremely high levels before crashing in a matter of years.

After Budget 2022, Finance Secretary T V Somanathan said cryptocurrency will never be a legal tender. In an interview with PTI, Somanathan said just like gold and diamond, despite being valuable, are not a legal tender, private cryptocurrencies too will never be a legal tender.

The government’s taxation move followed its decision to delay the introduction of the Cryptocurrency and Regulation of Official Digital Currency Bill in Parliament. The Bill was listed to be taken up during the last session of Parliament but the government later demurred, as it opted for wider consultations before seeking the House approval.