Crypto is unregulated in India, but taxes apply to them now. Taxes aren\u2019t a bad thing. They help you contribute to your nation\u2019s wealth, infrastructure, and future. But it is important to keep saving up for our own personal future, too. Do you know there are ways to save on the tax on your crypto gains?<\/p>\n\n\n\n
First things first, it is never wise to \u201cavoid\u201d your tax liabilities. Some think that using decentralized exchanges is a way out of paying tax money. But decentralized exchanges can be complicated to use, and you will have to bear all the risks involved on your own. More importantly, in the end, when you convert your gains to fiat, you will end up having to pay tax anyway. So using a decentralized exchange only helps delay your taxes; there are no long-term benefits.<\/p>\n\n\n\n
In any case, as citizens, it is our responsibility to follow the law and pay our dues diligently.<\/p>\n\n\n\n
It\u2019s a better idea to focus on how you can save taxes\u2014that is, not pay unnecessary taxes when you don\u2019t really have to\u2014rather than avoid them. Toward that end, let\u2019s start by understanding how these taxes work.<\/p>\n\n\n\n
The Union Budget for the financial year 2022\u201323 introduced taxes on crypto under the Income Tax Act. The Act defines Virtual Digital Assets (VDAs) as:<\/p>\n\n\n\n
\u201c\u2026any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically\u2026\u201d<\/p>\n\n\n\n
The Act thus imposes a tax on all VDAs, which are defined to include NFTs. Further, it specifies that the government could also decide to include other assets within its purview if and when required.<\/p>\n\n\n\n
Should you own any of the assets mentioned under the act, you will be taxed in the following ways:<\/p>\n\n\n\n
As an investor, chances are you may not want to pour as much as 30% of your gains into taxes. That is a huge amount, after all, and it is your hard-earned money. So here are a few ways to save on taxes.<\/p>\n\n\n\n
Contrary to popular belief, you don\u2019t have to buy cryptos to profit from their growth. Indirect exposure to crypto is an option. There are various global investment firms that allow you to invest in assets like mutual funds and Exchange-Traded Funds (ETFs) that are derivatives of crypto. In essence, you\u2019re only buying an international investment product that\u2019s based on crypto\u2014not crypto itself. Such indirect exposure can lower your tax liability.<\/p>\n\n\n\n
Here are some options you could look up to start with:<\/p>\n\n\n\n
Another way to save tax on crypto is learning about stablecoins and their many advantages. Stablecoins are less volatile than other crypto like Bitcoin<\/a> and Ethereum since their values are pegged to either fiat money, exchange-traded commodities, or another crypto. <\/span><\/p>\n\n\n\n You can keep the gains in stablecoins by converting your existing crypto holdings into stablecoins. You can do this on various crypto<\/a> exchanges that support stablecoins, such as Tether (USDT), USD Coin (USDC), or Dai (DAI). By converting your holdings into stablecoins, you can protect your gains from volatility.<\/span><\/p>\n\n\n\n However, it is important to note that gains from crypto transactions are subject to taxation in most jurisdictions, regardless of whether they are held in stablecoins or other crypto. With stablecoins, you are less likely to suffer a long-term capital loss.<\/span><\/p>\n\n\n\n As cryptos are becoming popular, crypto salaries has gained momentum among crypto enthusiasts. Crypto salary is a form of payment for work or services made in crypto rather than traditional fiat currency. The concept has gained traction among a section of technology and blockchain-related companies. <\/span><\/p>\n\n\n\nOpt for crypto salary<\/strong><\/h3>\n\n\n\n