The Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman today announced the introduction of Digital Rupee to be issued by the Reserve Bank of India starting 2022-23. Presenting the Union Budget 2022-23 in the Parliament here today, the Finance Minister said that the Central Bank Digital Currency (CBDC) will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system, the Minister stated. The Digital Currency will use block chain and other technologies.
With the introduction of such digital rupee many people must be confused as to whether the transaction or purchase and sale of such digital rupee will also be covered under the new taxation of virtual asset as this digital rupee of RBI will also be based on cryptography and blockchain.
However, we need to understand that the government is introducing this digital rupee as a digital format of physical rupee and the intention behind introducing this digital rupee is to make the money management more easy as it will be based on blockchain and hence one could track the amount and secondly it will reduce the cost of currency as now no printing of currency would be required.
Also, as per definition of section 2(47A) of Income Tax Act which defines virtual digital asset does not covers any currency and since this will be just a digital currency it won’t be considered as virtual digital asset and hence not liable for taxation under the new tax regime/ provision introduced for taxation of virtual digital asset covering cryptocurrency and NFT’s.
Relevant extract of section 2(47A) is as under:
“(47A) “virtual digital asset” means––
(a) any information or code or number or token (not being Indian currency or foreign currency)“
To read more on taxation of cryptocurrency and NFT CLICK HERE.
To read the Press release CLICK HERE.
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