Income tax

Income tax: How to minimize the 30% rate on crypto-currencies?

The demand for cryptocurrencies is on a roller coaster this year due to the bearish movement in the global market. As of the end of the second quarter of 2022, emerging markets are currently dominating cryptocurrency adoption, with India ranking fourth. Cryptocurrencies continue to be hot topics for investment options despite their complexity and highly sentimental nature. Cryptocurrencies are riskier than stocks. However, this market has shown a unique form of investing in digital currencies and many are still deceived by its charm. Like any other investment in market-related instruments, cryptocurrencies also have a multitude of tax rates that an investor will have to pay on their trades. However, some tax breaks are applicable especially for crypto assets such as airdrops, savings accounts, etc.

Effective April 1, the Indian government levied a tax rate of 30% on virtual currency assets, followed by a TDS of 1% which came into effect on July 1 this year. TDS will not be deducted given 10,000 and 50,000 depending on the investors specified in the tax brackets.

Vaibhav Gupta, co-founder of TaxCryp Technologies, said, “Tax planning for transactions involving the transfer of cryptocurrencies is a grim possibility since the government has come up with a rather watertight 30% tax regime. tax on all winnings without any set. off for loss trades. »

Gupta added, “However, one-sided receipts from crypto assets such as airdrops, deposit interest, etc. should be taxed at a taxpayer’s applicable slab rate rather than the maximum rate of 30%, thereby providing a some tax relief to crypto investors.”

According to the Chainalysis Global Crypto Adoption Index report for the second quarter of 2022, India currently ranks fourth in cryptocurrency adoption, after Ukraine, the Philippines, and Vietnam which hold the top spot for cryptocurrency adoption. second consecutive time.

Last month’s Chainalysis report said, “While growth has become more sporadic with the onset of the latest bear market, global adoption remains well above levels that preceded the 2020 bull market.”

He added: “The data suggests that a critical mass of new users who invest in cryptocurrency during periods of price growth tend to remain even when prices fall, allowing the ecosystem to grow constantly on the market. net through market cycles. One reason for this could be the value that users in emerging markets derive from cryptocurrency. These countries dominate the adoption index, largely because cryptocurrency offers unique and tangible benefits to people living in unstable economic conditions.

What is a crypto airdrop?

In general terms, crypto airdrops are a means by which an investor can earn free crypto from a crypto project.

Typically, particular crypto projects have a number of tokens available that can be given away to people who meet the eligibility criteria. An investor will need to complete a task to become eligible for these tokens. There are many ways to participate in these crypto airdrops. After completing the tasks, an investor can claim the tokens or receive them in his wallet.

What are crypto savings accounts?

Under a crypto savings account, an investor can earn interest on depositing their digital tokens on a specific crypto exchange. Unlike how normal banks decide to use customer deposits to lend to borrowers, here the investor decides to opt for depositing their cryptocurrencies while agreeing to lend their tokens to others.

The interest rates that a borrower will pay on borrowed funds are transmitted to the account of the investor who has chosen a crypto savings account. It is said that crypto interest on deposits generally tends to generate high returns compared to the traditional bank savings account.

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