Different nuances of the crypto tax regime should be evaluated to make sure investors are not hurt by it.
Since the new tax regime on crypto was announced, crypto influencers have been campaigning against it, urging the Government to reduce the tax rate.
Government has decided to impose a flat 30% tax on crypto gains beginning from the upcoming financial year.
Many crypto community members are against it. They believe that such a high tax rate can hamper innovation and growth of the industry.
However, on the other side of the spectrum, some believe that the 30% income tax rate is not much of a problem as already many people fall into that tax bracket.
Those with income above 15 lakhs already pay a 30% marginal tax rate.
The tax rate can be revised in future, but the main concerns are the 1% TDS and the no deductions policy.
TDS on each transaction would deplete the capital of a trader or investor. A relief in this policy is that the tax can be offset against the 30% tax on crypto gains.
But no deductions can be made on any losses or expenses other than those occurring during crypto transactions. So, losses and expenses in other streams of income cannot be deducted while computing tax.
Moreover, the loss from the transfer of crypto cannot be set off against any other income.
Well, a high tax rate means the Government is dissuading people from carrying out this activity. But, at the same time, it cannot be called unfair. Government should be urged to evaluate the different nuances of the regime that can be detrimental to the industry.
As crypto is largely unregulated, Government is resorting to taxes to keep its spread in check. If it gets regulated, the tax rate might be reduced.
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