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Maximizing Crypto Tax Efficiency with Wind in India

Business | Web3

  • August 21, 2023
  • 5 min
  • feature_image

    The cryptocurrency market is booming, but with gains comes tax responsibility. In India, crypto investors struggle with unclear tax rules.

    Wind.app uses blockchain for economical and secure money transfers and DeFi services like lending and investing. It supports stablecoins, tied to assets like the US dollar, ensuring stability, lower taxes, and potential interest earnings through lending.

    Understanding Crypto Taxation in India

    • Holding: Keeping crypto assets for over 36 months means they’re long-term capital assets, taxed at a 20% LTCG rate with indexation benefits. Holding under 36 months classifies them as short-term capital assets, attracting short-term capital gains tax (STCG) based on your slab rate. Losses from VDAs cannot be offset against profits or carried forward.
    • Gifting: Gifting crypto isn’t taxed for the giver, but the recipient might face tax based on gift value and relationship. Crypto gifts are taxed 30% for the giver and 1% for the recipient above certain limits. (1)
    • Mining: Mining crypto with a personal setup is a business, taxed at your slab rate; expenses like electricity, internet, and depreciation can be deducted. Deductions for crypto mining business; 30% tax and 1% TDS on mined crypto.
    • Salary:  Crypto in your salary is income, taxed as per your slab rate; report its fair market value on receipt. You will have income tax on it, but since the crypto is not “bought”, there is no crypto capital gains tax.
    • Donations: Donating crypto to registered charities aren’t taxed; approved organizations might offer deductions under section 80G of the Income Tax Act, 1% TDS above the threshold.

    Introducing Stablecoins

    If you’re someone diving into crypto investments, the wild ups and downs of the market can pose a real challenge. Designing investment plans in this lively field requires careful thought.

    Stablecoins are designed to keep a steady value, tied to a regular currency or something else of value. Imagine USDC, locked to the value of the US dollar, always 1:1, or DAI connected to a mix of different crypto values while keeping a loose link to the US dollar.

    Steady Ground in the Volatile Market: Cryptocurrency’s dynamism and revolutionary potential promise an integral role in the web3 evolution. Stablecoins not only safeguard investments but also facilitate DeFi expansion.

    Simplifying Taxes: Instead of switching your crypto around and facing lots of taxable moments, using stablecoins on Wind.app can slow down these tax events. This means you don’t have to worry about taxes until you actually make money or lose it. Plus, moving stablecoins within Wind.app keeps you away from the 1% tax that other platforms might charge.

    Accessing DeFi Fun: With your USDC wallet with Wind.app, you can get into the exciting world of DeFi – lending, borrowing, and earning rewards. Think of it as growing your crypto money while you relax. 

    But, not all stablecoins are cut from the same cloth. Some, like USDC or USDT, come from one source, which means they might have issues with rules or scams. Others, like DAI or RAI, are kind of like their own bosses, ruled by smart computer codes or a bunch of decision-making robots (DAOs). This makes them more secure and open, but they still can get tripped up by technical problems like hacks or glitches.

    Taxation on Cryptocurrencies in India

    The Finance Act 2022 listed a set of new earnings called Virtual Digital Asset (VDA) income. In simple terms, VDAs are digital values that can be traded or stored online. Stablecoins are also VDA.

    1. Profit from Trading: If you buy and sell VDAs to make money, it’s seen as VDA trading income. You’ll be taxed 30% on this income, no matter how much you earn regularly or how long you’ve kept the VDAs.

    2. Sending VDAs: For VDA transfers, you’ll have to take out 1% of the transfer value as Tax Deducted at Source (TDS) and give it to the government. The person getting the VDAs has to tell the government how much they got and pay taxes on it.

    3. Long-Term Investors: If you aren’t transferring VDA for the long run, you’ll pay taxes on the money you make or lose when you sell them, based on how long you’ve had them.

    4. Quick Traders: If you’re trading VDAs quickly and not holding them for more than 36 months, you’ll pay 30% tax on trading profits and 1% TDS on transfers. You can’t treat them as capital assets or get benefits for inflation.

    In India, handling taxes for cryptocurrencies can be a bit complicated and heavy. But, there are ways to lower your tax duties and make the most of your earnings by using stablecoins on Wind.app.

    Benefits of Stablecoins on Wind.app

    Wind.app uses blockchain tech to help you move your money around without it costing a bunch, keep your earnings safe, and give you financial services. It’s in sync with stablecoins like USDC, DAI, and RAI.

    Shield from Crypto Turbulence: Replacing volatile cryptocurrencies with stablecoins offers a protective layer & prevents the value of your funds from erratic shifts while sidestepping a 30% tax on potential gains from selling.

    Less Tax Hassle: When you stash your stablecoins on Wind.app, you don’t have to worry about taxes as often. You only pay taxes when you’ve actually made some money. Plus, you sidestep a 1% charge when you move your money around.

    DeFi Access: Stablecoins on Wind.app opens doors to services like lending and borrowing, and even scoring rewards through DeFi. They’ve joined forces with Aave, a company that lets you lend your money out and earn something in return.

    With Wind.app, you’re getting safety, savings on taxes, and the keys to some high-level services, all thanks to stablecoins.

    Passive Income via Stablecoins on Wind.app

    1. Lending: Lend stablecoins, earn interest, and select variable or fixed rates. Withdraw flexibly.

    2. Borrowing: Borrow stablecoins for trading or bills, backed by crypto collateral. Choose rates and maintain collateral to avoid issues.

    For robust yields on Wind.app, our integrated protocols Aave and Affine offer approximately 2% and up to 15% yields respectively. We continuously optimize for safety and yield but prioritize evaluating risks and research before investing. Interest via third-party products.

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