Crypto investors in India are about to face a new period of uncertainty. While the rule demanding a flat 30% tax on crypto revenue takes effect today, tax certainty is not a guarantee for the legal status of virtual digital assets (VDAs) in India, since the government is currently considering the issue.
The proposed 1% TDS on crypto transfers from July 1, 2022, as well as discussions on imposing GST on the whole value of crypto transactions, are expected to exacerbate crypto investors’ difficulties. In the face of uncertainty, keep the following points in mind when investing in cryptocurrencies:
Invest in what you can comprehend.
Investing in something you don’t fully comprehend could be disastrous. If you believe you should invest in a crypto asset, you should first learn everything you can about it. You could buy some of it if it is fundamentally sound and has a high potential for future growth. To understand a crypto project, one must understand technology and how it works, and if not, one should seek a reliable advisor to assess project viability.
Don’t put too much money into it.
Don’t invest too much if you understand the fundamentals of a crypto asset. Cryptocurrency is still a developing asset class that faces regulatory challenges. As a result, it is unsuitable for high-value investments. A 30% tax on crypto and 1% TDS on VDA transfers have dulled the luster of crypto marketplaces. Retail interest has also waned as a result of regulatory uncertainties in the future. High-value investments are not appropriate at this moment.
Furthermore, the cryptocurrency market is extremely volatile, making investments riskier. As a result, financial experts advise having only a modest portion of one’s portfolio in crypto at the moment. From an asset allocation standpoint, I consider cryptos to be riskier than even small-cap equities. At the moment, nobody would advise anyone to put more than 5% of their long-term investments in crypto.
Make long-term investments.
According to experts, 1% TDS on transfers will eventually kill crypto trading in India. As a result, quick gains with short transactions may be impossible. However, if you are confident in a crypto asset’s future potential, you may purchase part of it for long-term gains.
Investing in fundamentally good tokens is the only rational method to hold crypto at the time. Only invest in tokens that you truly understand and have a long-term potential in their use case. Invest only if you are willing to wait 5-10 years for returns.
Don’t try to avoid paying taxes.
Finally, as new tax regulations go into force today, it would be prudent not to do anything that would irritate the taxmen.
Crypto investors should avoid looking for ways to evade taxes on virtual digital assets and should avoid anyone who suggests a workaround to avoid taxes. It is critical to remain compliant.
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Examine where you keep your cryptocurrency.
Technology bites technology. You will be extremely disappointed if you do not know how to safely store your cryptos. Now that trading may not be profitable, the safest place to store your cryptocurrency if investing for the long term would be hardware wallets. The safest bet is to use self-hosted, non-custodial wallets.
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