How to be a Careful Crypto investor in India

How to be a Careful Crypto investor in India

Indian crypto investors are about to experience a new period of uncertainty. 

The rule mandating a flat 30% income tax on crypto assets comes into effect with today’s beginning of the new financial year. 

However, it is not a guarantee of legal status for virtual digital assets in India (VDAs), as the government is still considering the issue.

Crypto investors will be further troubled by the proposed 1% TDS on crypto transfers starting July 1, 2022, and discussions of imposing GST on crypto transactions’ entire value.

To avoid any losses, invest in cryptos with caution and be aware of the following tips:

Invest in the things you understand

It could prove disastrous to invest in something you don’t know. It would be best if you first learned everything you can about a crypto asset before investing. You may purchase some if it is fundamentally sound and has excellent potential for growth in the future.

“To understand a cryptocurrency project, one must understand the technology and how it works. If not, one should seek a reliable advisor to check project viability,” Dileep Sandberg, founder and CEO at blockchain development company Thinkchain.

Do not invest too much.

If you are confident that you understand the basics of crypto tokens, don’t make too many investments. Crypto is an emerging asset class that faces regulatory hurdles, and it is therefore not suitable for high-value investments. Crypto markets have been ruined by the crypto tax of 30% and 1% TDS for VDA transfer. Uncertainty about future regulations has also caused a decline in retail interest. It is not the right moment for high-value investment,” says Yash Upadhyay, strategy lead at IIFL Group.

Additionally, crypto investments are highly volatile and risky. Financial planners recommend that crypto should be a small portion of a portfolio.

“From an asset allocation perspective, I would consider cryptos riskier than small-cap stocks. Anmol Gupta is the founder of 7Prosper Financial Planners. He says, “I wouldn’t recommend anyone invest more than 5% in crypto at this time.”

How to be a Careful Crypto investor in India

How to be a Careful Crypto investor in India

Invest long-term

Experts believe that India’s 1% TDS on transfer payments would eventually end crypto trading. It may not be possible to make quick gains in short trades. If you’re confident about the prospects for a crypto asset, you might consider buying some to make long-term gains.

“Investing in fundamentally sound tokens is the best way to hold crypto. Only invest in tickets that you genuinely understand and can see the potential for long-term use. Gupta says that you should only invest if you’re comfortable receiving returns for 5-10 years.

Find out where your crypto is held.

Tech bites tech. If you don’t know how safe to keep your cryptos, you will be very disappointed. Hardware wallets are the best place to keep your cryptos safe, even though trading is not profitable. If you plan on investing long-term, this would be the best place.

“Self-hosted, noncustodial wallets offer the best protection. It is advisable to have the keys to all your digital assets and keep a backup. Sharat Chandra (VP, Research and Strategy, Blockchain-based identity management platform EarthID) says that it’s not your keys or coins.

Avoid trying to avoid tax.

Finally, tax reforms are now in effect. It would be wise to avoid doing anything that could anger the tax inspectors.

“Crypto investors shouldn’t look for ways to avoid taxes on virtual assets, and they should also stay clear of anyone who suggests a way to avoid taxes. Chandra says that compliance is essential.

Chandra suggests that you resist the temptation to accept free airdrops. “Airdrops from nondescript projects often lead to phishing or wallet thefts.” He says that it is essential to be careful and not fall for scams.

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