- Saturday, April 27, 2024
By: Admin Super
In the country’s 2018 budget report, Finance Minister Nirmala Sitharaman had announced a 30% tax on the transfer of digital assets such as NFTs and other cryptocurrencies. Although the finance minister did not provide a clear reason for the tax, many in the crypto industry believed that it would discourage investors. Others said it would reassure them because it came with stricter regulations.
The tax on the transfer of crypto assets will be 30%, and investors will not be allowed to set off losses against their other income. This is a strong signal against speculation and dissuaded many from entering the crypto market.
Dissuade or Attract New Investors?
There is a big fight in the industry on whether new investors should be dissuaded or attracted to the market. According to industry players, the move will encourage more customers to enter the crypto market. Also, it will address concerns around the legal status of the industry.
Despite the high taxation rate, Sathvik Vishwanath, co-founder of crypto exchange Unocoin, said that many new investors would still want to enter the space once the regulations are clearer. According to Sumit Gupta, the high taxation rate may deter more people from entering the crypto market. He noted that trading in crypto requires special skills and shouldn’t be compared to gambling. Many people wonder why the government can allow people to carry forward their losses, but then not allow crypto trading to be treated the same way.
How Stocks and IT Compare to Each Other
The 30% tax rate will make it difficult for investors to make a profit after selling stocks. For instance, a person who sold stocks after a year would need to return 12% on a principal of around 10 lakh. For a similar investment, the return would need to be 15.4% or more. Stock market investors would also have to set off losses.
Investors Should Expect to See Tougher Regulations
Mukul Shrivastava, a partner at EY, said that the higher tax rate may make crypto investing more attractive to certain investors. Legal experts also noted that investors will have to file separate tax returns for crypto transactions. Experts have said that the higher tax rate could signal the beginning of tougher regulations for the industry. The government has also proposed a 1% tax deduction on digital asset transfers over a certain threshold.
Investors Feeling Rushed to Sell off Crypto Before April
Though the prices of cryptos went up on the day the budget was announced, many investors rushed to liquidate their assets before the April 1 deadline. An attorney noted that capital gains from crypto transactions may be treated as ordinary income. For new investors, the tax policy may not be practical enough to warrant entering the market.
According to Nitin Sharma, an executive at a venture capital firm, active traders in crypto markets are most likely to be affected by the higher tax rate. He also added that the slab rates in Japan are reaching upwards of 55% or more. Middle-class investors may not want to take on the financial risk with the new tax policy to try and make some side income.
