In India, cryptocurrencies will now be taxed. The new tax legislation for cryptocurrency and other digital assets will take effect on April 1, 2022. Finance Minister Nirmala Sitharaman stated in the Lok Sabha while presenting the Union Budget 2022-23 that the transfer of digital assets will be subject to a 30% tax.
Furthermore, any transfers of such assets will be subject to a 1% tax deducted at the source (TDS).
Sitharaman stated in her Budget address on February 1 that presents received in the form of cryptocurrency will be taxed at the same rate.
Will It Be Tax-Wise For Small Investors To Convert Their Cash From Crypto To Mutual Funds Or Stocks Before The End Of The Next Fiscal Year?
Most financial experts feel that small investors may benefit from shifting their cash from crypto to mutual funds or equities in order to reduce taxes.
“In terms of taxation, small investors may find it advantageous to move their funds from crypto to mutual funds or stocks in order to avoid taxes, as the tax rate on crypto is higher than that on stocks and mutual funds.
Deduction of expenditures is also not permitted in the case of cryptocurrency, but it is permitted in the case of stocks and mutual funds.
However, the total choice must take into account other aspects such as risk tolerance, ROI, portfolio allocation, and so on “Abhishek Soni, Co-Founder, and CEO of Tax2win., said
It might be prudent to allocate part of your cash to the cryptocurrency market. “Depending on one’s risk tolerance, a 5 to 10% allocation is advised.
” It would be a shame to have missed out on this new technology. Many individuals are still kicking themselves for missing the Bitcoin and Ethereum rise.
Furthermore, increased exposure would be concerning given the volatility of cryptocurrencies. As a result, a 5 to 10% exposure for your portfolio would be the ideal alternative.
“Diversification is the key to a consistent stream of passive income,” stated Vishnu Gupta, Founder, and Director of Nonceblox Blockchain Studio.
What Is The Current Tax Rate On Earnings From Stocks And Mutual Funds? How Does It Compare To The Recently Proposed 30% Tax On Cryptocurrency Income?
Short-term capital gains on the sale of stock/equity-oriented mutual funds are taxed at a fixed rate of 15%. Long-term capital gains on the sale of equity shares/equity-oriented mutual funds, on the other hand, are taxed at 10% over a one-lakh gain. There is no tax on gains up to Rs. 1 lakh.
Other long-term capital gains are taxed at a rate of 20% with indexation advantages, while short-term capital gains are taxed at the relevant slab rate, according to Abhishek Soni.
Furthermore, in Budget 2022, crypto taxation is suggested, with income from crypto taxed at a fixed 30% rate, with no deductions allowed to save for the cost of purchase.
Furthermore, losses from cryptocurrency are not permitted to be deducted from other income and cannot be carried forward, according to Soni.
According to Kunal Jagdale, Founder of BitsAir Exchange, the proposed 30% tax on crypto trading profits is unquestionably excessive. While this may not be significant for taxpayers in the highest income brackets, where the tax rate is already 30%. It will have an impact on individuals who have previously enjoyed tax-free earnings from crypto trading. Typically, this category includes low-income individuals and students who paid no or very little tax on their cryptocurrency profits.
As a result, he noted, the additional tax will only harm the tiny players. According to Vishnu Gupta, Founder and Director of Nonceblox Blockchain Studio, a 30% tax on cryptocurrency is both better and worse.
“A 30% tax on cryptocurrency stands in the position to be both better and worse. Better because no complicated tax computation method is necessary, which saves you a lot of concern and work. Worse, only when the flat rate is considered.
Keep in mind that there is no surcharge, no Tax Consultant costs, and no clutter. “Most individuals seldom hold since there is good and negative news for each company on a daily basis,” Vishnu Gupta said.
Tax Applied On Stocks
- Long-Term Capital Gains Tax is exempt if the share is held for more than a year and purchased on a stock exchange.
- Short-Term Capital Gains Tax (Holding Period of Less Than One Year): 15% flat rate.
Taxation Of Mutual Funds
- Long-Term Capital Gains Tax (Holding Period more than a year):
- Exceeding 1 lakh in earnings:
- 10% + Cess for equity funds
- Debt Funds: 20% plus Cess
- Short-Term Capital Gains Tax (Holding Period of Less Than One Year): 15% Flat Rate.