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With just few days to go before the new crypto tax regime kicks in, investors should sell their cryptocurrency holdings as soon as possible to save on taxes.
In the Budget 2022, government has proposed to impose 30% tax on gains made through investments in digital assets like cryptocurrencies and non-fungible tokens (NFTs). The new rule will come into effect on April 1.
If the investment is sold by March 31, the gains will be taxed as per the income tax rate applicable on the investor. This means that if an investor falls in the 5% tax bracket then the gains from cryptocurrency investment will be taxed at 5% now. However, post April 1, all profits from cryptocurrency investment will be taxed at 30% irrespective of investors' income.
Should you sell if the investment is at a loss?
It depends. If an investor expects the investment to turn green soon then waiting could make better sense. However, selling cryptocurrencies at a loss now makes better sense than selling it at a loss later from the taxation perspective. Now, there's scope to set-off losses from cryptocurrencies against profit from some other asset. Post April 1, this will not be possible. In fact, investors will not even be able to set-off losses in one crypto with gains in another.
