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Cryptocurrency: After the implementation of the provision of 30 percent tax, is the trend of investors towards cryptocurrencies decreasing?

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Cryptocurrency: The provision of 30 percent tax has been implemented on the earnings from cryptocurrencies from the new financial year starting from April 1, 2022. But the trouble for investors is that there has been a big decline in cryptocurrencies in recent days. If you had invested one lakh rupees in bitcoin a year ago, then its value has come down to only Rs 56,000 as of today. Investors are incurring a loss of Rs 44,000 crore. But their difficulty is that this loss cannot be compensated by other sources of income.

TDS will have to be paid despite crypto loss
Finance Minister Nirmala Sitharaman had announced the imposition of 30 percent Capital Gain Tax on cryptocurrencies. But let us tell you that investors who do not sell cryptocurrencies for profit will also have to pay tax. Investors investing in such cryptos will have to pay one per cent TDS so that the government can trace the exact whereabouts of those transacting in cryptocurrencies. Selling crypto at a profit will attract a tax of 30 percent. But even if not sold at profit, TDS of one percent will have to be paid, so that it will be known where crypto transactions have taken place. The provision of levying one percent TDS on cryptocurrencies is going to be implemented from July 1, 2022.

There is no provision for adjusting the loss in crypto
Cryptocurrency investors are not allowed to offset gains from one cryptocurrency for losses in another cryptocurrency. Let us explain you through an example, suppose an investor has invested in both bitcoin and ethereum cryptocurrencies. And if he makes a profit of Rs 1 lakh by investing in bitcoin and a loss of Rs 1 lakh by investing in ethereum, the investor will still have to pay tax at the rate of 30 percent on Rs 1 lakh. Actually, there is a provision to adjust the profit loss arising from investment in property, shares. But cryptocurrencies have been kept out of this provision. The government has clearly stated that as per the provisions of the proposed section 115BBH of Income Tax 1961, loss arising from transfer of VDA (Virtual Digital Assets) shall not be allowed to be set-off against income arising from transfer of another VDA . Section 115BBH is a newly proposed clause in the Income Tax Act that defines gains from virtual digital assets such as cryptocurrencies.

Investor’s enthusiasm about crypto is decreasing
On the one hand, investors investing in cryptocurrencies are suffering. Despite this, the burden of tax is coming on them. Due to which the enthusiasm of investors to invest in crypto has decreased since the provision of 30 percent tax came into effect from April. Crypto investors are now investing for the long term instead of daily trending. This has led to a fall in the volume and revenue of the domestic crypto exchange. Investors are now exploring the possibility of investing in cryptocurrencies related to gaming and the metaverse.

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