If an investor sells by 31 March, the gains made in the current financial year (2021-22) will be added to his income and taxed at the marginal rate applicable to him. But from 1 April, there will be a flat tax of 30% on all gains, irrespective of the income level of the investor. Even if the investor has no other income, every rupee earned from cryptos will be taxed at 30%.
Worse, losses from one crypto can’t be adjusted against gains from another. This rule should spur investors who are in losses. If they sell by 31 March, their losses from cryptos can possibly be adjusted against other capital gains. From 1 April, no such adjustment will be allowed.
Tax experts feel the new rules have been framed to discourage investments in cryptos. “It’s a continued effort to isolate and disincentivize crypto currency related activities in India. The prevention of offset between different cryptos will negatively impact traders,” says Rohinton Sidhwa, Partner, Deloitte India.
Crypto entrepreneurs were hoping that the rules would be amended. “We firmly believe that there is a need to regulate and tax cryptos. But in the current form, the taxation is poised to do more harm than good. It will also fail to provide the desired results for the government,” said Nischal Shetty, CEO of WazirX.