With the entry into force of the new rules on crypto taxation from April 1, 2022, stakeholders and exchanges may witness a large-scale sale of crypto assets, especially by retail investors. Multinational financial technology company, FIS, said in a statement that under current laws, crypto as an asset class has become less attractive in India. The company said many small investors would have unloaded their portfolios by March 31, but some large investors may still continue to trade.
“Crypto as an asset class has definitely become less attractive and there is a broad consensus that current holders and investors would sell, given the announced tax regime for virtual digital assets. However, HNW investors who are already in the 30% tax bracket may view this scenario a little differently, especially if they are betting windfall gains due to the way major crypto markets recognize and regulate the cryptography in FY22,” Harish Prasad, Head of Banking at FIS said in a statement.
Prasad added that there is a growing segment of holders who acquire crypto by virtue of their participation in the Web3 digital economy, and they need to put in place long-term strategies on how they manage their crypto holdings. .
“India’s move in the crypto market has been largely priced in by global markets in my view, and global market moves will now depend on global dynamics around demand and how large global markets regulate crypto,” he noted.
Crypto industry stakeholders had raised concerns that the new tax rules would deal a heavy blow to the industry and could impact trading activity on local platforms, with retail investors preferring overseas exchanges where 1% TDS will not be implemented.
The new rules include a 30% tax on the transfer of virtual digital assets, in addition to 1% TDS for each transaction. Also, the government has not allowed offsetting of losses against profits on other VDAs and no tax deducted for crypto mining.