Tips to Save Crypto Taxes

Tips to Save Crypto Taxes: Cryptocurrency investing is the current hottest trend on the global investment market. Because they are digital currencies, governments and other centralised financial institutions cannot control them. The government is still liable for the income generated by its sale, transfer, trading, and/or transfer.

The Government of India has set tax rates on profits arising out of digital currencies. Digital assets profits would be subject to a 30% income tax rate and a 11% TDS deduction.

But did you know there are several strategies that can help you save taxes on profits from cryptos.

You can read more to find out about some of these.

Tips to Save Crypto Taxes

How do you save crypto tax?

Here are some great tips that can help you cut your crypto tax.

1) Keep your crypto in the long term

As crypto is a long-term investment, you should plan for it. This will enable you to save more tax.

If you have held your assets for less than 12 months, this is called a “long-term capital gain”. You can also sell your investments within a shorter time frame to make a short-term capital profit.

Experts claim that long-term capital loss taxation on crypto assets would be less than short-term capital gain taxes. Some experts suggest that you might lower your crypto taxation 10% by accumulating long-term crypto gains.

After 12 months, you can sell your cryptocurrency. Taxes will be lower because of the low tax rate.

2) Get indirect exposure to crypto

To reduce your crypto taxation, one of the best steps is to get indirect exposure to cryptocurrency. Some portfolios launched recently by global investment platforms let Indian crypto investors gain exposure to particular digital currencies without actually buying them or investing in them.

Crypto investors can take advantage of low taxation by investing in indirect exposure.

3) Sell in a low income year

Your taxable income is what determines your tax rate for crypto sales. Selling your crypto assets in a year with a low income will result in a lower tax rate. This allows you to save money on crypto taxes.

The other advantage to waiting until a low-income year, is that the tax rate for crypto assets will be calculated based on the long-term capital growth rates after 12 months. You get double the tax savings.

4) Keep the gains in stablecoins

Stablecoins are a great way to save money on taxes as well as protect your investment over the long-term.

Stablecoins can be compared to Bitcoins in that their value is linked to a currency, commodity or other financial instrument. This makes them less volatile. By investing in stablecoins, you are less likely long-term to lose capital.

USD Coin’s value is 1 USD Coin equals 1 US Dollar. This means that investing in stablecoins can make sense, given the US Dollar’s growth.

These are some ways to avoid paying crypto taxes. A tax professional’s guidance is highly recommended before you implement any of these strategies.

Keep in mind that the crypto taxation rate, which was introduced in this budget for 2019, will not apply to crypto gains received before 31 March 2022.

A well-planned strategy will help ensure that you get the best tax savings while following the income tax guidelines.