India will impose a tax of 30% on income from cryptocurrencies and other digital assets, Indian Finance Minister Nirmala Sitharaman said while presenting the federal budget on Tuesday.

Aside from placing earnings from cryptocurrencies and non-fungible tokens (NFTs) in India’s highest tax band, Sitharaman also said losses from their sale could not be offset against other income, delivering another disincentive to trading and investment in digital assets.

Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around Rs400 billion ($5.37 billion). No official data is available on the size of the Indian crypto market.

Proponents of digital currencies have been hoping that the establishment of a formal tax framework could at least spare the crypto industry from some of the more draconian measures that the government had been considering.  

“The 30% tax on income from virtual digital assets, while high, is a positive step as it legitimises crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs,” said Avinash Shekhar, chief executive of ZebPay, a cryptocurrency exchange.

Tax consultants reckoned individuals could end up paying more than 30% of their crypto profits in tax and other charges.

“If you made a profit of Rs100 then including the 30% tax bracket, plus surcharge and cess the total tax outgo will be around Rs42,” Amit Maheshwari, partner at AKM Global, a tax and consulting firm told Reuters.

Crypto exchanges also hoped the new tax regime would signal acceptance of digital currencies by the authorities, and reassure corporates that they can enter the market.

“We also hope this development removes any ambiguity for banks and they can provide financial services to the crypto industry,” said Nischal Shetty, CEO, WazirX, another virtual currency exchange.

India’s central bank has voiced “serious concerns” around private cryptocurrencies on the grounds that these could cause financial instability. As a result, several banks severed ties with crypto firms.

The finance minister also said that the central bank will introduce a digital currency in the next financial year using blockchain and other supporting technology.

“The introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” Sitharaman added.