Will 30% tax on digital assets trigger sell-off among cryptocurrency investors?

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The union finance minister’s announcement of taxing virtual digital assets at 30 per cent,in addition to 1 per cent tax deducted at the source (TDS) has sent ripples through the cryptocurrency ecosystem, even as the crypto exchanges remain confident that this is a first step towards legalization of the digital assets.

The immediate impact on cryptocurrency trading in India, as per experts, will be hard to gauge especially since there still remains ambiguity over whether the 30 percent tax rule will be effective in retrospect or will come into force next financial year.

With the  various cryptocurrency prices not at all-time highs currently , the experts predict that a sell-off immediately may not occur in Indian markets , but the investors could take a holding position.  Crypto investors are also wary of the provision that states that any loss during the transfer of virtual digital assets will not be set-off.

“This has definitely made investor community a worried lot. The implications will be that if I want to sell my cryptocurrencies at a lesser price than the cost of acquisition, I will still be paying the taxes. This is definitely huge wealth erosion. The better stance would be rather holding the crypto long-term,” an investor said during a Twitter spaces session with the WazirX CEo, Nischal Shetty on Tuesday.

Shetty said that the crypto investors should adopt a wait and watch mode, not to resort to any panic selling, especially till the time a fine blueprint of the concerned regulation is available.

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