Bitcoin nears $90,000: Strategies for Indian investors in a tough tax climate

The recent surge in Bitcoin prices, driven by Donald Trump's 2024 U.S. election victory and his pro-crypto stance, has ushered global crypto markets into a bullish phase. However, Indian investors face a dilemma due to the country's high tax burden on crypto gains, which includes a 30 per cent tax on profits and a 1 per cent Tax Deducted at Source (TDS) on each transaction. Industry leaders are offering strategies to help Indian investors maximise their crypto assets under these constraints.

Edul Patel, CEO of Mudrex, suggests that long-term holdings can be beneficial as they defer tax obligations and take advantage of the historic growth cycles in cryptocurrency. He mentions that Systematic Investment Plans (SIPs) allow for phased entry, reducing exposure to market volatility. Products like crypto index funds provide diversified exposure, offering investors risk management tools in a challenging tax environment. Patel advises prospective investors to prioritise FIU-registered exchanges for regulatory transparency and security.

Shivam Thakral, CEO of BuyUcoin, shares a similar view on the advantages of SIPs, adding that Indian investors can use tools for tax management and risk diversification available on leading platforms. Thakral emphasises the importance of staying updated on the crypto landscape and understanding tax obligations to avoid unnecessary risks.

Dilip Chenoy, Chairperson of Bharat Web3 Association, recommends a diversified investment approach. He suggests allocating across asset classes like stocks, bonds, and real estate to provide stability, balancing the high risks and tax burdens associated with crypto. Chenoy advises investors to consult tax professionals and use crypto tax software to optimise their tax strategies and remain compliant with evolving regulations. Being informed about policy changes and exploring compliance tools are key steps to effectively navigate the current landscape.

While current policies are restrictive, there is optimism for change. Patel highlights that as the U.S. moves toward clearer crypto regulations, there may be a ripple effect, potentially encouraging India to revisit its stance. Avinash Shekhar, Co-Founder & CEO of Pi42, notes that a responsible regulatory framework in India could unlock significant growth potential for the digital economy. With India ranking highly in the Chainalysis Global Crypto Adoption Index, a supportive regulatory environment could solidify its position as a crypto hub.

Dilip Chenoy echoes this sentiment, pointing to India's recent G20 discussions and the upcoming consultation paper by the Department of Economic Affairs as promising steps toward a more balanced regulatory future.

Given the high domestic tax rates, some investors might consider international diversification within legal frameworks. Patel suggests staking and DeFi (Decentralized Finance) options as potential avenues to earn returns, though he cautions that investors should ensure compliance with Indian tax laws when using international platforms. Stablecoins and regulated platforms for international investments also offer diversification opportunities without incurring frequent trading taxes domestically.

Indian investors are advised to adopt a patient, disciplined approach, using long-term strategies and compliant platforms to navigate the current situation. While the high tax rates present a challenge, stakeholders believe that the evolving regulatory landscape could eventually become more favorable.

For now, Indian investors are urged to stay informed, seek diversified exposure, and leverage structured products that align with legal and tax guidelines. By combining strategic financial planning with compliance, investors can still capitalise on the bullish global crypto momentum, even under India's stringent tax regime.

Disclaimer: Business Today does not provide financial, investment, or tax advice and is not responsible for any investment decisions made by readers. All opinions expressed within this article are those of the respective experts and do not constitute endorsements or recommendations by Business Today. Readers are strongly encouraged to conduct their own due diligence and consult with certified financial or tax professionals before making any investment decisions.