Cryptocurrency has received global attention over the past year. India alone has the second-highest cryptocurrency users worldwide & the Indian market grew by over 641 percent, through June 2021 alone. Emerging economies worldwide are facing higher expected Inflationary movements. People in these emerging nations are now looking toward Peer to Peer platforms for buying Virtual Assets like Bitcoin to save their wealth from eroding.

Governments surely did notice this as a threat to the sovereign paper currency. Take the Indian government for example which imposed a flat 30% tax on all profits without even framing a proper bill to regulate the Virtual Assets. As of writing this article, Indian exchanges have surely been hit after the 1st of April. Volumes have dropped across all major Indian players namely WazirX, CoinDCX, CoinSwitchKuber, and Zebpay, among others.

Many Traders are finding ways of evading taxes by switching their funds over to International Exchanges which is something that we don’t suggest at all doing right now. These tax laws have no clarity on trades being done on a DEX that operate on Liquidity Pools or the ones being done on International Exchanges. All this has led to industry-wide speculation among people suggesting saving taxes.

When is the Tax Applicable?

Just as a precaution, please do note that I’m not a financial advisor. The following remarks are just my own point of view which may be right or wrong (mostly wrong!). Always do your own research or consult a CA to plan your taxes in advance.

Before I talk about the flat 30% tax, there is something called TDS which everyone is against for. TDS or Tax Deducted at Source is something used by the Income Tax Department to track the income generated from multiple places like Fixed Deposits, Bonds, Salary, etc.

TDS is used to collect the tax from the same source of income upfront. Now it’s not necessary that the TDS deducted has been taken permanently. It is adjusted or refunded to the taxpayer based on their income at the end of every financial year.

After the announcement of these new tax laws for Virtual Assets, a flat 1% TDS clause was also imposed on all the sellers. TDS is to be deducted by the exchange or the buyer and deposited to the Income Tax Department against the PAN number of the seller.

Now for the average person, 1% TDS might seem all good but once you start crunching the numbers, the real picture comes forward. Even if you incur a loss or sell at zero profit, 1% of your capital is locked up till the end of the financial year.

When you start making more & more trades, this 1% which looks small initially starts to get bigger and bigger.

Serial No.Principal InvestedProfit/Loss %Sell Val.TDS @ 1%P&LTax @ 30%Moving On

As you can see, till the 50th trade even with 0% profit, almost INR 20,000 has been locked away as TDS. Day traders have been forced to look at alternate routes because of this predatory TDS.

Instead, what could have been reasonable were a 0.01% TDS on every trade & a slab-wise tax on profits.

When’s this Tax Imposed?

After looking at the comments on Twitter, I can say very sure that people are still confused about the new tax laws. Firstly, 30% tax is applicable only on the profits & not on the entire sell value.

To understand this even better, let’s take an example. Let’s say you bought XYZ coin for Rs 100 and later on you sold it for Rs 200. Your total tax liability for this transaction is Rs 30 only, ie Rs (200-100)*0.30.

However, TDS is applicable to the total sell value of your assets. So in case you’ve sold the assets for Rs 200, the TDS deducted will be Rs 2 when you sell the coin. Thereby, you’ll be liable to pay an extra Rs 28 to the Government in the financial year after adjusting your TDS.

Another catch is there for the users. TDS is only applicable for those people who sell more than Rs 10,000 worth of Virtual Assets in a Financial year. So if any of your family members is just starting out as an experiment to diversify beyond traditional financial assets, he/she won’t have to pay any TDS up to Rs 10,000 in a year.

HOLDERS don’t need to pay a penny to the government. As long as you don’t sell or exchange your assets after buying, your tax liability is zero. This means if you’re doing a SIP of Rs 1,000 a month in Bitcoin, you’re not liable to pay any Crypto Tax.

International Exchanges

(Source: CoinMarketCap)

Traders who make a living out of this market are switching their portfolios over to Custodial wallets or International Exchanges. You might wonder why?

That’s because it will be harder for the government to impose a TDS clause on these platforms. Day traders can keep on doing their thing without having to worry about their principal getting locked away on these platforms.

Blockchain by its very nature has been built to leverage trust and remove middlemen from any transaction. Wallet providers like Metamask & Trust Wallet have no KYC norms for people signing up on the platform.

Unless someone uses these apps to deposit funds on a CEX, nobody can trace the owner of these wallets. Regulations need to be framed around these platforms & if you’re wondering why not just ban them?

Well, you can’t ban the Internet. All someone needs to access their wallet is a Laptop/Mobile with an Internet Connection. This makes it a sweet hiding spot for people hoarding black money.

How can you be safe?

Well, before ending this article let’s make a set of rules to be compliant with the Government laws. As a Citizen, it is our duty to pay taxes on time no matter whether we like or hate it.

  • Plan your taxes in advance. Use tools like Google Sheets or Excel to track each and every trade.
  • Don’t try to evade taxes. If you get a notice, explain yourself to the authorities.
  • Consult a CA before making any firm decision. Expert opinion matters.
  • Understand the laws before trading.
  • Avoid using multiple apps and platforms. It can get really messy if too many apps and software are used to trade. Stick with one good app and keep using it.

Thanks to Ethereum Push Notification Service

You may have already noticed that we don’t serve any ads on our website. That’s because of awesome projects like EPNS which help us sustain the website. If you don’t know about them already, it’s a decentralized Web 3.0 based notification platform. Unlike Android or iOS notifications, EPNS uses a decentralized approach to send alerts about your activities on DEXs and platforms like CoinDesk, MakerDAO, BTC Tracker, and more.

Credits: EPNS App

How to get started?

  • Firstly, you’ll need to have a wallet like Metamask, WalletConnect, etc.
  • You can then download the EPNS application from Play Store or App Store and sign up using the Wallet ID.
  • If you’re like me, a Browser Extension must look like your favorite option.
  • Go to the available notification channels.
  • Click on “Opt-In” & Sign the popup. It’s free and doesn’t take any gas.
  • That’s it.

The best part, EPNS is already working on a Wallet to Wallet messaging service. If you haven’t checked them already go now!


Educating people about Blockchain over Zoom and offline events. Writing blogs related to crypto and making videos explaining it.