Source : beincrypto.comhttps://s32659.pcdn.co/wp-content/uploads/2021/03/bic_artwork_taxes.jpg
Cryptocurrency platforms in India are exploring new ways for investors to earn from their crypto, in an effort to mitigate the impact of the prospective tax.
India’s finance minister proposed a 30% tax on returns from digital currencies and a 1% Tax Deducted at Source (TDS) on digital assets when announcing the annual budget. Notably, however, the government neglected to use the term “cryptocurrency” in the budget, favoring rather “virtual digital assets.” According to wily investors, this means there will be no tax on crypto-based products.
“The way the regulations are today, investors who invest in crypto-based products should not be covered either under the 1% TDS, or 30% tax on income,” said Darshan Bathija, co-founder and CEO of Singapore-based crypto exchange Vauld. “However, we have sought clarity on this from the government and will be approaching them in this regard.”
Crypto and stablecoin earning incentives
Crypto platform executives say if there is no tax incidence on crypto-based products, it would create a greater incentive to earn interest on crypto deposits or draw loans against cryptocurrencies, the products and services for which would be in greater demand from investors.
“[The tax] will increase our operations as people will prefer to take out a loan on their crypto holdings, instead of selling it to avoid the tax implications,” said Kumar Gaurav, founder and CEO of online banking platform Cashaa. He added that it would also boost long-term holders, for instance in the case of his own platform’s users, who use their savings account to generate passive income without trading.
While investors and executives speculate, however, there is still no certainty that the new tax will not impact digital asset investments or returns from loans drawn against cryptocurrencies. Given the volatile nature of crypto assets, investors may ultimately be more inclined to products that offer stable returns.
“We have already released a new product which will give up to 24% annual interest rate on stablecoins just by holding it in our wallet, Gaurav said. “Soon we will see a lot of startups tap this market, as bank interest rates in India are below 8%, but converting them into dollar-backed stablecoins can increase the interest rate drastically.”
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