Cryptocurrencies suffer a recession this week; This is how the new tax rules affect investors

Although the 30% tax on crypto assets came into effect from April 1, and 1% TDS will also be deducted from crypto assets from July.

Under the Finance Bill 2022, a 30% capital gains tax is imposed on cryptocurrency transactions. In addition, a loss incurred during the transfer of the virtual asset will no longer be permitted to be offset against any income calculated under the “other” provision of the IT Act, as the word “other” has been removed.

Simply put, a loss of Bitcoin assets cannot be offset by income in Ethereal or any other virtual digital asset.

On Friday, Bitcoin is close to $42,450. In the last 24 hours, cryptocurrencies have plunged more than 2%. Generally speaking, most cryptocurrencies have registered selling pressure. On the other hand, Tether, USD Coin, Binance USD, TerraUSD, and Dai have seen marginal gains, while one cryptocurrency Monero is up even more than 5%.

According to data from CoinMarketCap, the global crypto market capitalization is $1.96 trillion, down 2.05% from the last day. The total volume of the crypto market in the last 24 hours is 69.34 billion dollars, which represents a decrease of 15.15%. Bitcoin dominance is currently at 41.06%, down 0.07% on the day.

Meanwhile, in the last seven days, data from CoinMarketCap shows that market leader Bitcoin has plunged by more than 8%. While Ethereum, the second largest crypto after Bitcoin in terms of market cap, has plunged more than 7%. Other cryptocurrencies like BNB plunges almost 5%, XRP drops more than 9%, Solana plunges over 20.50%, Cardano plunges more than 11.5%, Terra drops almost 18%, Avalanche shrinks almost down 17%, Polkadot down 15%, Shiba Inu down more than 9%, and Polygon down more than 14%, among others. In general, the crypto markets have been in a bearish tone these days.

But in these seven days, not all cryptocurrencies have faced a sell bias, few remained stable and even gained momentum, albeit at a slower pace. Tether was flat, Dogecoin is up almost 2%, Near Protocol jumped almost 8%, Monero is up over 7%, and Convex Finance is up almost 3%, among a few others.

The start of April has led investors more into profit booking than buying sentiments as crypto markets posted more profit bookings.

Many factors have driven the price movement of cryptocurrencies this week.

From tightening monetary policy, strict tax rules, soaring commodity prices to the biggest elephants in the room, geopolitical tensions and concerns about global inflation pressures, everything has played a role in the change of sentiments towards virtual currency trading.

Now, for example, let’s take into consideration the last seven days of cryptocurrency performance. With the new tax rules in India, traders cannot offset losses incurred in Bitcoin, Ethereum or XRP with profits recorded in Near Protocol and Monero.

Furthermore, starting in July, merchants will also pay a 1% TDS on crypto assets, further adding to the problems.

So how do the country’s new tax rules impact merchants?

Nischal Shetty, co-founder of WazirX, said: “The proposed 30% tax, regardless of whether crypto assets are capital assets or not, will be detrimental to the investor growth that the industry has been seeing so far. This move will make the day-traders unable to save on taxes even if they are not currently in the income tax brackets Also, not allowing investors to offset the losses of one crypto trading pair with the gains of another will further deter participation in crypto and will strangle the growth of the industry.

“We strongly believe there is a need to regulate and tax cryptocurrencies, but it is about to do more harm than good in its current form. It will also not deliver the desired results for the government. It may result in cascading involvement in India.” exchanges that adhere to KYC standards and lead to an increase in capital outflow to foreign exchanges or those that are non-KYC compliant. This is not conducive to the Indian government or crypto ecosystem,” Nischal added.

On tax rules, Probir Roy Chowdhury, Partner at J Sagar Associates (JSA), says: “The finance bill seeks to impose a flat 30% tax on cryptocurrency earnings. While this would result in an increase of 5% in taxes to be paid by companies in cryptocurrency trading, this would most significantly affect smaller “retail investors” who may be in lower tax brackets or have been relying on profits tax rates of lower capital. This TDS will result in a drop in liquidity as the TDS would be imposed regardless of the profit or loss of each trade.”

Regulatory restrictions are considered a barrier for crypto markets.

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