At the time of introducing the yearly budget 2022, India’s Finance Minister recommended a 30 per cent tax on digital currency returns and one per cent Tax Deducted at Source (TDS) on virtual assets. However, the government avoided using the phrase “cryptocurrency” in the budget, instead opting for “virtual digital assets”. According to some investors, it indicates that there would be no tax for crypto-based items.
Darshan Bathija, who is co-founder and CEO of a Singapore-based crypto exchange named Vauld, informed that this current legislation in the budget announcement does not cover crypto-based goods for 1 percent TDS or the 30 percent income tax. He further informed that they had asked government officials for clarification in this regard. He also claimed that if there was no taxation on crypto-based goods, there would be a stronger incentive to accrue interest on crypto depositors or take out loans against bitcoins, resulting in higher demand for the products and services.
Kumar Gaurav, another investor and founder & CEO of Cashaa, a banking platform, said that people would choose to take out a loan on their crypto assets rather than sell them to avoid the tax ramifications, hence the tax would increase operations.
Despite investors and executive’s anticipation, there is still no guarantee that the new tax would have no impact on digital asset investments or profits on cryptocurrencies-backed loans. Given the erratic character of crypto assets, investors may eventually choose solutions that provide predictable returns.