An industry once rife with uncertainty has been legitimized and steered towards a clear regulatory path. However, regulatory clarity also brought with it some obligations. High tax rates and an additional 1% TDS on transactions quickly became a deterrent for retail investors. Transaction volumes dropped and the crypto economy headed underground or to more tax-friendly shores.

Despite this, industry experts like Gupta support the official recognition and structured environment that cryptocurrencies now enjoy. More than a year after the implementation of this new framework, confusion and misunderstandings remain among both new and experienced investors. The average investor is still grappling with tax reporting and calculation complexities, especially regarding the use of crypto in staking, mining, and day-to-day business transactions.

Gupta aims to clarify the more complex aspects of cryptocurrency taxation, clear up common misconceptions and provide a clearer understanding of the regulations.

Cryptocurrency trading and mining profits are subject to a flat 30% tax, without any deductions or comparability of losses allowed. However, staking income is taxed according to the individual’s income tax bracket, potentially offering a lower rate. The Web3 industry, including CoinDCX, is calling on the government to align the 30% tax rate on Virtual Digital Assets (VDV), particularly with securities. A high tax rate and failure to allow comparison of losses discourages entrepreneurship, innovation, job creation and foreign investment, potentially driving talent and capital abroad. Adjustments to these tax policies can encourage growth and innovation in the sector.

It is crucial to dispel the misconception that all cryptocurrency activity is subject to a flat 30% tax or that staking rewards are only taxed on sale. Staking rewards are taxed upon receipt based on market value. Additionally, trading losses cannot offset other types of income. Investors should keep detailed records and seek professional tax advice to manage and comply effectively. CoinDCX has partnered with KoinX to help users file crypto taxes. This platform offers users the ability to track tax calculations, connect multiple exchanges and wallets, and see real-time tax amounts for all cryptocurrency transactions, including NFTs and DeFi investments.

The G20 discussions, particularly those held in India, have provided a solid platform for shaping global cryptocurrency regulations. It is crucial for the development of such comprehensive frameworks. These frameworks can then be adapted by individual countries. For India, these discussions provide a template for regulatory clarity that ensures a balanced approach that benefits all stakeholders. Bringing Virtual Digital Asset (VDV) transactions under the Money Laundering Act (PMLA) is an example of such regulatory clarity as it allows regulators to police the crypto space and deter illegal activities.