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Staying on course

A Budget that continues the good work, and reaps the reward for good fiscal management during COVID

Staying on course

It's a Budget that's hard to comment on. That's a good thing, actually. Till a certain point, everyone used to have a lot to say about Union Budgets. The prices and duties of everything used to change and the impact on every household budget as well as every corporate's accounts was unique. Analysts would run huge spreadsheets to calculate the likely impact of duty changes on the bottom lines of hundreds of companies. From biscuits or footwear or steel or fertiliser and of course cigarettes, duties would change.

GST has put an end to all that. Along with petroleum prices tracking the markets, and custom rates stable, nothing much changes on budget day. A couple of hours after the budget papers are released, and the politicians have spouted their pre-decided reactions, it's mostly over. About the only point of interest that remains - and that's my own area - are changes that will impact personal finance and tax-saving investments. On that too, this year's budget maintains complete silence.

That's good, too. Stability in personal finance is something highly desirable and even though there are things that can be improved in the tax-savings laws (there always are), staying on the current course is not a bad choice by any means. As far as the personal budgets of most people are concerned, the fact that the Union Budget does not contain anything that is overtly inflationary will likely prove to be the biggest positive in the months to come. This is a byproduct of the balanced approach that the government took for COVID relief, doing what was needed without ruining the fiscal situation.

The positives do not include the unfortunate ones whose personal finances are now entangled in what have now been officially named 'virtual digital assets'. Crypto regulation has come to India, at least as far as taxation goes. The tax is heavy and seems designed to ensure that it will be hard to make money out of trading crypto. Profits will be taxed at 30 percent while losses cannot be set off. Importantly, these will be taxed as income (but at the highest slab, regardless of your actual slab) and not as capital gains. This is a novelty - something being an asset but profits from its sale being income. However, for a novel challenge like crypto, this is a good solution.

The crypto law has been carefully drafted and takes into account the fact that crypto can be sold off against other digital assets and also used to buy non-digital assets. If you buy crypto and then use it to buy some other non-crypto asset, say on a foreign website, then it appears that this will be treated as a sale of crypto with payment received in kind and taxed as such. So, in practice, if you have 2BC and use it to buy a car then that will be seen as if you have sold the 2BC and received the car as payment with any gains as taxable. This pretty much puts paid to any practical use of cryptocurrencies by law-abiding individuals.

There are other aspects of crypto regulation that need to be tackled urgently, for example, the ballooning activities and lack of regulation of self-styled crypto exchanges. There's also the elephant in the room, which is the fact that apart from speculation, the actual use of cryptocurrencies is only criminal activities like ransomware, terror funding and such but that's a separate story. Apart from that, India will also dabble in issuing a 'digital rupee' but of course, that will be of no interest at all to the kind of people who are so interested in crypto nowadays.

Another thing that catches the eye is the relentless focus on extending the physical and digital infrastructure in the country. Within the year, all post offices in the countries will be connected to the core banking system with ATM and fund transfer access. This extension of the financial system will have a far greater impact than any minor tinkering here or there.