The demand for cryptocurrencies has been on a roller coaster ride this year due to the slowdown in the global market. As of the end of Q2 2022, emerging markets currently dominate cryptocurrency adoption, with India ranked fourth. Cryptocurrencies are one of the hot topics for investment options despite their complexity and highly emotion-driven nature. Cryptocurrencies are riskier than stocks. However, this market has shown a unique form of investment in digital currencies and many are still impressed by its attractiveness. Like every other investment in market-related instruments, cryptocurrencies also have multiple tax rates that an investor has to pay on their purchases and sales. However, some tax reliefs are specifically applicable for crypto assets such as airdrops, savings accounts, etc.
With effect from April 1, the Indian government has imposed a 30% tax rate on virtual currency assets followed by 1% TDS which has come into effect from July 1 this year. TDS will not be deducted on consideration of 10,000 more 50,000 depending on the investors specified under the tax bracket.
Vaibhav Gupta, Co-Founder, Taxcripe Technologies said, “Tax planning for transactions involving transfer of cryptocurrency There is a bleak prospect as the government has come up with a water-tight taxation regime of 30% tax on all profits without any set-off for loss transactions.”
Gupta said, “However, unilateral receipts from crypto assets such as airdrops, interest from deposits, etc. should be taxed at the applicable slab rate of the taxpayer instead of a maximum rate of 30%, thus providing some tax relief to crypto investors.” ..”
According to the Chainalysis Global Crypto Adoption Index report for the second quarter of 2022, India currently ranks fourth in cryptocurrency adoption after Ukraine, the Philippines and Vietnam, which topped for the second time in a row.
“While the development has become more sporadic with the onset of the latest bear market, global adoption is well above the levels prior to the 2020 bull run,” Chainalysis reported last month.
It added, “The data shows that a significant mass of new users who capitalize in the cryptocurrency during periods of price growth persist even in the face of declining prices, allowing the ecosystem to grow steadily across market cycles.” One reason for this may be that users in emerging markets derive value from cryptocurrencies. These countries dominate the adoption index, as cryptocurrencies provide unique, tangible benefits to people living in volatile economic conditions.”
What are crypto airdrops?
In general terms, a crypto airdrop is a medium through which an investor can earn free crypto from a crypto project.
Typically, particular crypto projects have a certain amount of available tokens that can be awarded to people who meet the eligibility criteria. To become eligible for these tokens an investor must complete a task. There are several ways to participate in these crypto airdrops. After completing the tasks, an investor can claim the tokens or will receive them in his wallet.
What are crypto savings accounts?
Under a crypto savings account, an investor can earn interest on depositing their digital tokens in a specific crypto exchange. Unlike how ordinary bank customers decide to use deposits to lend to borrowers, investors choose to deposit their cryptocurrency while agreeing to lend their tokens to others.
The interest rates paid by a borrower on the borrowed funds are routed to the account of the investor who opted for a crypto savings account. It is said that crypto interest on deposits usually yields higher returns than a traditional bank savings account.
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