Crypto tax: Crypto has become relatively less attractive in India, says fintech firm FIS

With the new rules on crypto taxation coming into effect from April 1, 2022, the stakeholders and exchanges may witness a large-scale selling off crypto assets, especially by small investors. Multinational fintech firm, FIS said in a statement that under the prevailing laws, crypto as an asset class has become less attractive in India. The company said that many small investors would have offloaded their portfolios by March 31, however some big investors may still continue trading.

“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 tax regime announced for virtual digital assets. However, HNW investors who are already in the 30 per cent tax bracket may look at this scenario a little differently especially if they are betting on windfall gains on the back of how large crypto markets recognize and regulate crypto during 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 participating in the Web3 digital economy, and they need to device strategies for the long term on how they manage their crypto holdings.

“India’s movement in the crypto market have largely been factored by global markets in my view, and the moves of the global market will now depend on global dynamics around demand and how large global markets regulate crypto,” he noted.

The crypto industry stakeholders had raised concerns that the new tax rules will be a big blow to the sector and may impact the trading activity on homegrown platforms with the small investors preferring overseas exchanges where 1 per cent TDS will not be implemented.

The new rules include 30 per cent tax on the transfer of virtual digital assets, in addition to 1 percent TDS for every transaction. Besides, the government has not allowed offsetting the losses against the profits on other VDAs and no tax deducted for crypto mining.