Tax is a way for the government to earn money and this is one of the important sources of income for any government. There are a few types of taxes including sales tax or income tax etc. It's the sovereign right of any government to get the tax on income and as responsible citizens, we should pay the tax on time. Crypto has grown significantly in the last few years and in India also so many people have made a good amount of money through this. Although there was no tax policy for crypto in India until the last financial year it was needed for anyone to pay tax if they fall into the tax slabs however not everyone was paying the due to lack of clarity.
This year government has implemented the tax last for crypto and it's effective from the 1st of April already. Now after the new tax implementation, things are getting impacted badly and this was not at all expected however looks like there is no easy fix for this soon.
- With the recent tax implementation where the slab is flat 30% for everyone and no matter if the person falls in the taxable category or not but tax has to be paid as per 30% slab. Because of this many traders have stopped trading since this rate is too high and not everyone is able to make that much money through trading.
- Another rule that does not allow to set off the loss for any crypto trade and this has also made things worse. In a normal scenario, any loss with this same segment can be set off however in crypto this option is not provided so if a trade has a loss in one trade and profit in another then that loss-making trade cannot be offset.
- TDS with a 1% tax has also been introduced which will be effective from 1 July 2022 and is applicable for all the trades thereafter. Although this is not an additional tax its impact is negative and for a regular trader, it will lead to a reduction in trading value. For example- if a person places a trade for 10k USD and then as per 1% 100 USD will be deducted and if a trader does 1- trade in a day then his capital amount will be reduced by almost 1000 USD and he will be left with 9k along with any profit if he is able to make.
- Despite all these challenges, banks are also not supporting payment services to exchanges. Recently Coinbase had started the trade in India using UPI and it was blocked later on. Now even the existing exchanges are not able to use UPI payment service because which instant deposit and withdrawal service is not working.
So above are some of the challenges that have impacted the crypto community negatively in India. Exchanges have lost their trading volume by almost 75% and this is also leading to the liquidity crisis. Liquidity is one of the major parts of the crypto trade and if this continues for a long then things will not be easy for sure. Brain drain has also started here as some exchange founders have moved to Dubai and it became news. I hope that govt are aware of all these impacts and scenarios because it's obvious that people like to work where they are provided a nice working environment where they get all needed support so that they can focus more on the innovation and development side.
Overall, whatever has happened or happening is not good for the crypto traders and exchanges and we can just hope that things to improve however looking at the current scenario it does not seem to happen soon. I am not giving up on crypto because of all this chaos and since I am a hodler so I am not much worried about the tax because it's applicable the moment we sell and I am not going to sell anything.
Thanks.