Over the last few years, India has been through a tumultuous relationship with cryptocurrencies; with persisting uncertainties regarding whether or not cryptocurrencies would be considered legal. All of the uncertainty surrounding the crypto industry was put to rest in the most recent budget, which, among others, came with the giant headline: 30% Tax of Cryptocurrencies.
This budget has proven to be a mixed bag for budget cryptocurrency investors, and it remains to see how the effects will unfold. In the meantime, we can always speculate about how the crypto industry will benefit from this budget, and whether the benefits of crypto are worth it after the 30% cut. Here is how the Budget is beneficial for the crypto industry:
Right off the bat, this is the biggest benefit. The decision to tax cryptocurrencies reduces some of the uncertainty around the legality of crypto trading and investing.
A 30% tax and the associated legalization of trading provides the instrument with more credibility, which will attract new investors. Once again, however, the argument is made that the 30% tax rate being too high will nullify this effect.
For many crypto investors, the biggest win of Budget 2022 is that it shows that the government is trying to understand the concept and benefit of cryptos, making investing in the instruments a legitimate avenue to revenue generation in the country.
All this being said, a 30% tax is fairly high and can act as a significant deterrent to investments. To counter this, one will have to make adjustments to their strategy to aim for higher returns. For instance, in order to make 1.1 lakhs post-tax on a principal investment of 10 lakhs, you as an investor would need about 12% returns on their equity. With the 30% in place in the crypto industry, however, you would need to target about 15.5% returns in the same duration.
The 30% tax rate of crypto has left a lot of investors polarized; Some believe it is a good thing that it has been legalized and the tax is worth it. Others however believe the rate is too high. However, an adjustment has to be made regardless, keeping the 30% in mind, and assessing whether cryptos are still worth investing in after the tax cut. If as an investor you are able to make the adjustment and attain increased returns, crypto investments might still be worth considering after the budget as well.
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