The trio combination of bank account, aadhar, and mobile phone linking is a major milestone. It has made digital payments possible and much easier on this App and it has evident from the growing number of online transactions these days. Such digital payment modes have reached the nook and corner of the country. Undertaking transactions without a cheque or currency note is not easy. Considering the advances in technology, India has come a long way in making this possible.
Cryptocurrency in India
The concept of cryptocurrency is not new to any Indians. Many Indians have tried their luck with this investment model. India takes the first position in the total volume of crypto investment. Technological and digital advances have contributed to it. There are many Indians who have crypto as compared to other investments like gold, shares, etc.
Crypto is not completely regulated in India. There is no governing principle or tools to track this investment. But, the government has agreed that this investment model is not ignored. Efforts are underway to study this investment scheme. The pros and cons including the protection of investor interests are a priority. The government will also establish its tie-up with crypto exchanges. It will allow the government to understand the volume of investments and investors.
India’s tax rule on cryptocurrencies
The topic of cryptocurrency and its investment module has been a piece of discussion for a long time now. Crypto exchanges and investors have always looked forward to a positive sign.
The topic of crypto came up for discussion during the budget session in 2022. The union minister announced that India will be imposing a 30% tax regimen on crypto.
Additionally, the minister also clarified that India will be releasing its native crypto. This digital currency will have the backing of RBI and its governing principles. The currency will work on a blockchain platform. The minister also clarified that the new tax rule will be applicable effective April 1, 2022.
Further to this, the union minister also clarified that there will be an extra 1% TDS. In case of anyone wishing to give cryptos, then 1% tax at source is applicable. The rule is an exemption when crypto is given as a gift.
Technically, India has not banned or approved crypto investments. But the above move has sparked controversies about making crypto legal in India. While the minister did not respond, there is still a lack of clarity here.
The Union Minister also agreed that the move is not aimed to reduce investments. Instead, many people are profiting from this investment. The profits are taxable and will become useful for uplifting the economy.
How are investors reacting to this new rule?
Mixed reactions are what this announcement brought forward. While exchanges felt the move was welcoming the lack of clarity is still amiss.
There was a huge reduction in the total number of investors. Many exchanges reported that crypto investments fell by more than 55%. Less traffic and people apprehensive about the tax scheme have reduced investments.
Investors are looking at moving their funds to another investment with low taxes. There are no new investments. Existing funds are not traded and retained. Many investors think that the government may review the tax regimen. Trading can continue once a revision on the same comes through. Cryptocurrencies are no longer an asset. Investors are feeling the heat and are likely to reduce investments.
Small-time investors do not want to risk with their investments
The high tax rate is depressing. Many small-time investors are not ready to dismiss the tax regimen. Many investors are not ready to risk their funds. In the current scenario, even withdrawing these funds is likely to incur taxes. Hence, many investors are now wanting to keep their investments as is.
If the taxes continue to remain the way it is, there are high chances of investments moving out of India. People may choose to invest in countries that do not have a tax regimen. Many countries have either written off tax rules or slashed the tax bucket. This has made this investment affordable.
It is a wait-and-watch situation.