Cryptocurrencies were readily accepted by Indian investors as a great tool to invest, especially Bitcoin Boom that happened a few years back. During all these years, India Became one of the major countries that saw the largest volumes of crypto trading, with hundreds of millions of trades taking place in mere hours. Although the government and the Reserve Bank of India have always voiced their opinion about these digital tokens, both fear that cryptocurrency There will be a serious impact on India’s economy and crimes will also get aided.
with its non-acceptable point of view cryptocurrencyThe government, during Budget 2022, inserted a new section under the Income Tax Act, under which income from virtual digital assets will be taxed at the rate of 30 per cent, while TDS will also be levied at 1 per cent on these digital tokens. Both tax provisions were included at a time when, incidentally, the crypto world was witnessing prolonged onslaught on the global scene as the markets prepared for a long winter amid the Russo-Ukraine war.
Trading Volume Takes Major Hit in India
This came as a double-edged sword for India, where investors were quick to exit investing in cryptocurrencies. Trading in India has been hit in the past few months, with investors refusing to invest their money in assets that would attract such high taxes, and is also witnessing a crash.
“With the insertion of section 115BBH in the Income Tax Act, income from transfer of any virtual digital asset (VDA) has become taxable at the rate of 30 per cent. This development with the applicability of 1 per cent TDS, among others, Apparently, current and potential cryptocurrency traders and investors have been cautioned in view of the fact that a higher tax liability would be on account of the income that may arise from cryptocurrency trading and investments,” said Aditya Chopra, Managing Partner, Victoriam Legalis – Advocate and solicitor told News18.com.
The recently implemented tax rules in India will block the liquidity needed to revive bear markets. “The central theme of crypto is decentralization. Therefore, these tax rules will increase the regulatory and compliance burden. Tax regulations further add to the challenges as they can lock off the liquidity needed to revive crypto markets,” said ClearK. Founder and CEO Archit Gupta said.
Is it still safe to invest in cryptocurrencies?
With trading volumes in India falling sharply ever since the government implemented the 1 per cent TDS provision, crypto investors, already battling bear market pressure, may ask whether these are still a safe havens. can be considered property.
“To answer the question of whether investing in crypto can still be considered safe, we need to look at the basics of investing and understand tokennomics, token utility, potential risk-return trade-offs, and asset class diversification. This will help investors to make their investment decisions without taking all the due diligence. One can choose to invest in blockchain technology or through shares of companies with a stake in any crypto,” Gupta told News18.com told.
“Given how people invest in crypto with less knowledge and more influence, one should appreciate these regulations as they will only help keep investors money safe,” he said.
Experts agreed that investing in cryptocurrencies was never a ‘safe’ option, as they are subject to risk and volatility – as we have been seeing since early January. For example, bitcoin is currently trading at a price of $21,000. This same crypto coin was scaling new highs during the second half of 2021, when it set a record reaching nearly $69,000 in October.
“Investors may re-evaluate their cryptocurrency investments as trading volume declines. Risk and volatility in the cryptocurrency market is not a new phenomenon,” said Rishi Anand, Partner, DSK Legal.
“Given that volatility and risk, more or less, have existed in the cryptocurrency market since then, it is pertinent to note that, although the investment may or may not be safe from a market value perspective as of today. Prohibited by the operation of law or has not been declared illegal,” Chopra said.
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