Crypto Winter, tax rules cast a shadow over India’s business; Can it still be described as safe?

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Indian investors readily accepted cryptocurrencies as a great way to invest especially after Bitcoin boom that occurred a few years ago. During all these years, India It has become one of the major countries where cryptocurrency trading has seen the largest trading volumes, with millions traded in just a matter of hours. However, the government and the Reserve Bank of India have always had reservations about these digital tokens, as they both fear it Cryptocurrency It will have severe impact on India’s economy and will also help with crimes.

With its unacceptable approach to CryptocurrencyDuring the 2022 budget, the government introduced a new section under the Income Tax Act, whereby income from virtual digital assets will be taxed at a rate of 30%, with a TDS tax of 1% on these digital tokens. Both tax provisions were included at a time, incidentally, the crypto world in the global scenario was experiencing a prolonged onslaught as the markets were preparing for a long winter amid the Russo-Ukrainian war.

Trading volume takes a big hit in India

This came as a double-edged sword for India, as investors were quick to withdraw from investing in cryptocurrencies. Trade took a hit in India over the course of a few months, as investors refused to put their money into an asset that would attract such high taxes, and are also seeing a crash.

“With the inclusion of Section 115BBH in the Income Tax Act, income from the transfer of any Virtual Digital Asset (VDA) is now taxable at a rate of 30 percent. This development along with the possibility of 1 percent of TDS can be applied, Among other things, Apparently, current and potential cryptocurrency traders and investors have been made cautious in the wake of the fact that significantly higher tax liabilities will be attributable to the income that may be generated from trading and investing in cryptocurrencies,” Aditya Chopra, managing partner at Victoriam Legalis – Advocates and Solicitors, told .

The recently imposed tax rules in India will prevent the liquidity needed to revive bear markets. “The main theme of cryptocurrency is decentralization. Therefore, these tax rules will increase the regulatory and compliance burden. Tax rules have added to the challenges as they may lock up the liquidity needed to revive the crypto markets,” said Archit Gupta, founder and CEO of Clear.

Is it still safe to invest in cryptocurrency?

With trading volumes dropping sharply in India since the government implemented a 1 per cent TDS provision, crypto investors already suffering from bearish market pressures may be wondering if they can still be considered a safe asset.

To answer the question of whether investing in cryptocurrencies can still be considered safe, we will need to visit the basics of investing and understand tokens, token benefit, potential trade-offs for risk and return, and asset class diversification. This will help investors make calculated investment decisions without throwing all caution to the wind. One can also choose to invest in them through stocks of companies that have a stake in blockchain technology or any cryptocurrency,” Gupta told

“Looking at how people are investing in cryptocurrencies with little knowledge and greater impact, one should appreciate these regulations as they will only help secure investor funds,” he said.

Experts agreed that investing in cryptocurrencies was never a “safe” option in and of itself, as they are subject to risks and volatility – as we have seen since the beginning of January. Bitcoin, for example, is trading at $21,000 at the moment. This same cryptocurrency was climbing new heights during the second part of 2021, when it hit a record high of nearly $69,000 in October.

“With lower trading volumes, investors may reassess their investments in cryptocurrencies. Rishi Anand, Partner at DSK Legal, noted that risks and volatility in the cryptocurrency market are nothing new.

“Since the volatility and risks in the cryptocurrency market, in one form or another, have been around ever since, it is pertinent to note that while investments may or may not be safe from a market price perspective so far, cryptocurrency trading or investing has not taken place. Ban it or declare it illegal by law,” Chopra added.

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