Cryptocurrencies are associated with a variety of tax rates that an investor must pay on their buy and sell just like any other investment in market-related instruments.
However, certain tax relief is offered, particularly for digital assets like savings accounts and airdrops.
Because of the gloomy trend in the global market this year, demand for cryptocurrencies has been on an up-and-down roller coaster. By the conclusion of the second quarter of 2022, emerging markets will predominate in the adoption of cryptocurrencies, with India coming in at number four.
Despite their complexity and highly sentiment-driven nature, cryptocurrencies remain one of the most popular investment options. Compared to stocks, cryptocurrencies are riskier.
However, this market has demonstrated a distinct way to invest in digital currencies, and many people are still duped by its charm. Cryptocurrencies have a variety of tax rates that an investor will have to pay on their transactions, just like any other investment in securities.
However, certain tax deductions are obtainable, specifically for crypto assets like savings accounts and airdrops.
The Indian government started taxing cryptocurrency assets at a rate of 30% from April 1 and extended it to 1% TDS on July 1 of this year. TDS won’t be taken into consideration when paying somewhere between 10,000 and 50,000 depending on the investors who qualify under the different tax brackets.
“Tax planning for transactions involving the transfer of cryptocurrency is a gloomy option,” said Vaibhav Gupta, co-founder of TaxCryp Technologies, “since the government has come up with a relatively watertight taxation regime of 30% tax on all gains with no set-off for loss transactions.”
But rather than being taxed at the top rate of 30%, Gupta continued, “the unilateral receipts from crypto assets like as airdrops, interest from deposits, etc. should be taxed at the applicable slab rate of a taxpayer.” This would give crypto investors some tax relief.
Also Read: How to Protect Your Investments if India’s Crypto Ban Happens
India is presently ranked fourth in the world for cryptocurrency adoption, behind the Philippines, Vietnam, and Ukraine, according to Chainalysis‘ Global Crypto Adoption Index study for the second quarter of 2022.
“While growth has become more unpredictable with the commencement of the latest bear market, worldwide adoption remains substantially above the levels that preceded the 2020 bull market,” the Chainalysis analysis from last month stated.
It said, “According to the research, a critical mass of new users who invest money in cryptocurrencies during bull markets are more likely to stick around even when prices fall, enabling the ecosystem to expand generally throughout market cycles.
The value that crypto users in emerging markets derive from it may be one factor for this. The fact that people living in unpredictable economic environments can benefit uniquely from cryptocurrencies in these nations, which dominate the adoption index, is a major factor in this.”
What are Cryptocurrency Airdrops?
In general, crypto airdrops are a way for investors to enjoy free crypto from a cryptocurrency project.
A limited number of tokens are typically made accessible by specific cryptocurrency projects, and these tokens can be distributed to applicants who match the requirements. In order to qualify for these tokens, an investor must finish a task.
These crypto airdrops might be taken part in a variety of methods. An investor can claim the tokens or receive them in their wallet after completing the requirements.
What are Cryptocurrency Savings Accounts?
An investor can earn interest on the deposit of their digital tokens to certain crypto under a crypto savings account.
In this case, the investor chooses to deposit their cryptocurrency while agreeing to lend their tokens to others, in contrast to how traditional banks choose to use client deposits to lend to borrowers.
The investor who selected a cryptocurrency savings account will receive the interest rates that a borrower would pay on the loaned cash. According to rumours, cryptocurrency interest on deposits typically generates higher returns than standard bank savings accounts.