New Delhi: Crypto investors in India are experiencing several bullish and bearish trades in cryptocurrency world. The investors might enter into a new phase of uncertainties now. As the rule of a flat 30% tax on crypto income will come into force with the new financial year, that is today, tax certainty will tend not to be a guarantee for the legal status of virtual digital assets (VDAs) in India as the government is still mulling the issue.
The proposed 1% TDS on crypto transfers from July 1, 2022, and talks of imposition of GST on the entire value of crypto transactions are expected to further increase the woes of crypto investors.
Amid all the uncertainties, let’s keep the following things in mind to avoid unnecessary losses when investing in crypto:
1. Invest in what you can understand
One shouldn’t be investing in something that is difficult to understand. This can be disastrous. If you plan to invest in a crypto asset, first you need to try to understand everything about it. If this sounds fundamentally great with huge potential for growth in the future then you can definitely invest in it.
“To understand a crypto project, one needs to have an understanding of technology and how it works, and if not, then one should get a reliable advisor for checking project viability,” says Dileep Seinberg, founder and CEO of blockchain development company Thinkchain.
2. Don’t invest too much money
After understanding the fundamentals of a crypto token, don’t invest too much. Crypto is still considered to be an evolving asset, which is facing regulatory hurdles. Thus, is it not found for high-value investments. “Crypto tax of 30% and 1% TDS on transfer of VDAs have taken the shine away from crypto markets. Retail interest has also faded owing to the uncertainty about future regulations. It is not the right time for high-value investments,” says Yash Upadhyay, strategy lead at IIFL Group.
3. Invest for a long term
According to experts, 1% TDS on transfers would gradually kill crypto trading in India. This, quick gains with short trades may not be possible. Only, if you are certain about the future prospects of a crypto asset, you can buy some of it for long-term gains.
4. Check where are you holding your crypto?
It would be troublesome if you don’t know how to hold your cryptos safely. As sometimes, trading may not be profitable, the safest place to hold your crypto would be hardware wallets if investing for the long term.
5. Don’t try to dodge tax
With the new tax rule becoming effective today, it would be wise not to do anything that would draw the taxmen’s ire. “Crypto investors should not look for ways to dodge taxes on virtual digital assets and stay away from anyone suggesting a workaround to avoid taxes. Staying compliant is necessary,” says Sharat Chandra, VP, Research and Strategy at blockchain-based identity management platform EarthID.
