New Delhi: Finance Minister Nirmala Sitharaman, presenting the Budget FY 2022 had announced 30% taxation on digital assets, starting from coming financial year. This meant that all virtual assets including crypto currencies and non-fungible tokens (NFT) will come under tax gambit from April 1.

As the new tax regime on digital currencies come into effect, all your crypto holdings will incur heavy charges thus impacting your earnings. Any transaction in the crypto asset will be taxed at a flat rate of whopping 30% and therefore will significantly cut down the earnings from digital assets.
Further altering the norms of crypto trade, the government said that losses incurred in one crypto can’t be offset with gains in any other virtual asset.

Also, the imposition of cess & surcharges along with 30% taxes is set to take the sheen off crypto trade. Earnings from digital currencies are being treated as earnings from horse races or other speculative transactions.

Crypto hold vs Crypto sell, what should you do

Many financial experts advised investors to better get rid of digital assets, given the 30% tax plus cess on earnings from cryptos. Investors who have already made gains need not stay in the market as they have already booked profit.

If someone wants to stay invested, can do so by buying off fresh assets after April 1. Those investors with a long-term vision can continue to hold on the investment. If someone has invested huge amount, they may continue to hold on as this will yield returns in the long run.

Another big reason to sell is no provision for investors to offset losses. The new rule prescribes that losses from crypto assets or mining cannot be set off against gains from other crypto coins.

How crypto markets will change after April 1

Despite the heavy tax burden, many industry experts are betting big on the digital currency and hoping for robust market in days to come. As India’s crypto market size is quite small, any changes in tax laws won’t have a bearing on the global crypto bourses & markets. Also, the crypto trading is driven by many global & cross-national factors bypassing domestic upheavals.

India has seen surging graph in terms of number of crypto users & volume of crypto trade but the burden of tax is likely to dissuade & demotivate investment in the digital asset to a great extent. But, this may not be applicable to long term & new investors entering market after April 1, 2022.

Many experts are of the view that crypto trade in the country will see slight correction or sluggishness for sometime before riding the wave again and creating a strong trajectory of growth.