In an unexpected announcement, India stated that it plans to introduce its digital currency next year and tax cryptocurrencies and NFTs.

According to Nirmala Sitharaman, the country’s finance minister, any income generated from the transfer of virtual assets will be taxed at 30%. She also suggested that a 1% tax deduction should be made on payments made on the purchase of virtual assets so all crypto transactions would be recorded.

On Tuesday of last week, Narendra Modi’s government announced that it will launch an official digital currency and begin taxing earnings from cryptocurrencies in the fiscal year 2022-2023.

After throwing crypto investors into a tailspin by recommending a ban in November 2021, New Delhi has now reversed gears and is jumping on the bandwagon.

The finance minister, Nirmala Sitharaman, has declared that India’s central bank will release a CBDC (central bank digital currency) in 2019.

“A digital rupee will be created using Blockchain and other technology by the RBI beginning in 2022-23. This will have a significant positive impact on the economy,” Sitharaman said in her Union Budget 2022-23 address to Parliament.

The tax of 30% on cryptocurrencies was not popular among Indian citizens, as the #reducecryptotax hashtag began trending in India.

Many individuals think that the 30% tax will dampen public interest in the cryptocurrency sector, but Priyanka Sharma from WazirX had a unique view on the subject. According to an interview with CoinMarketCap, Priyanka said:

It’s always interesting to see how our government adapts and changes with the times. For example, given that our FM was referring to crypto as a virtual digital asset, it shows that they are beginning to recognize it as an emerging asset class. Clarity on taxation is a big development because not only does it give legitimacy but also recognition to thecrypto ecosystem of India.

She continued, saying that crypto should also be legalized to encourage official services like banks to work with exchanges. On the day of budget announcement, WazirX saw a 52% increase in signups compared to the previous day.

The majority of people, corporations included, who have been holding back from crypto because of uncertainties will now be encouraged to participate.

India issecond on the list for global crypto adoption. With crypto being taxed in India and recognized as a form of asset, the country could easily overtake Vietnam due to its large population size, recent technological advancements, and historyof IT exports.

Many publicly listed companies in the United States have included Bitcoin into their balance sheets, but the Indian business sector has been largely unaffected, possibly due to regulatory considerations that will change dramatically.

Institutional investors have always been weary of regulatory ambiguity, but the newly announced tax rules have given some clarity.