The newest and most popular trend in the global financial industry is investing in cryptocurrency. Also, because they are decentralized, digital currencies are not governed by any centralized organizations or governments.

Yet, the government is still able to tax the money made from its sale, exchange, or transfer.

In the Union Budget 2022, the Government of India proposed cryptocurrency tax rates that are inextricably linked to earnings from digital currency. Earnings from digital assets would be subject to a 30% tax rate and a 1% TDS reduction.

But did you know there are several strategies you may employ to successfully lower the amount of tax you must pay on bitcoin profit?

Continue reading to learn more about some of them.

How cryptocurrency taxes could be reduced?

These are some of the greatest recommendations for lowering your cryptocurrency tax.

Gain exposure to cryptocurrency indirectly

One of the easiest methods to reduce your cryptocurrency taxes is to have indirect exposure to cryptocurrencies. It’s noteworthy that a number of recently launched portfolios by various foreign investment platforms allow Indian cryptocurrency investors to have exposure to a certain digital currency without actually buying it or making a direct investment in it.

You could experience low taxes as a bitcoin investor with such indirect exposure.

Save your cryptocurrency for the long haul

Always strive for a long-term monetary gain while investing in cryptocurrencies instead of a fast one. You could reduce your tax liability as a result.

When you sell your assets after owning them for at least a year, the gain is referred to as a long-term capital gain. On the other hand, if you sell your investments in a shorter time than a year, you will benefit from a short-term monetary advantage.

Experts predict that long-term capital gains taxes on cryptocurrency assets will be far cheaper than short-term capital gains taxes. Some analysts claim that you may be able to pay 10% less in bitcoin taxes if you have long-term cryptocurrency gains.

After a year, you can sell your bitcoin if you’d want. You will save more money on taxes as a result of the low tax rate.

Sell during a year with a low income

Your taxable income determines what percentage of your bitcoin sales revenues will be taxed. As a lesser income ensures a lower income tax rate for that fiscal year, selling your crypto assets during a low-income year enables you to cut your crypto taxes.

Another advantage of waiting until a low-income year is that, after a year, the tax rate on crypto assets may be calculated using long-term capital gain rates. You as a consequence get twice as much from tax savings.

Maintain your winnings in stablecoins.

Your bitcoin sales money may be invested in stablecoins to potentially avoid taxes and protect your investment over time.

As their value is linked to another coin, item, or financial instrument, stablecoins are less prone to price fluctuations than other cryptocurrencies like Bitcoin. A long-term capital loss is less likely to occur if you invest in them as a result.

For instance, one US Dollar is equal to one USD Coin. Given the ascent of the US Dollar, putting your cryptocurrency in such a stablecoin would be a wise choice.

Here are some strategies for lowering your bitcoin taxes. Nevertheless, before using any of these recommendations or strategies, consulting with a tax specialist is strongly advised.

The tax rate set in this year’s budget will not apply to you if you earned any bitcoin revenues on or before March 31, 2022.

You may optimize your tax savings while still adhering to income tax requirements if you take the proper method.

Conclusion

Since 2018, a lot has changed in the world of cryptocurrency investing. Institutions are now considering investing in crypto assets in greater numbers. It is clear that decentralized technologies are gaining popularity, and data indicates that India is a sizable market for both DeFi and Web3. 

The tax undoubtedly creates a place for cryptocurrency as a noteworthy asset from the decision-makers, but India has yet to see what more is in store from the Union Budget 2023 or the G20 meeting.

Read more along the lines of the crypto tax guide.