Mumbai: As investors explore ways to save tax on their cryptocurrency investments, crypto platforms are introducing new products.

They seek to earn interest on their crypto deposits or take out loans against cryptocurrencies, without attracting the new tax.

The budget proposed a 30% tax on digital currency returns and a 1% withholding tax (TDS) on digital assets.

The government did not use the term “cryptocurrency” in the budget, but rather “virtual digital assets”.

This means there will be no tax on crypto-based products, investors said.

“As the regulations currently stand, investors investing in crypto-based products should not be covered by either the 1% TDS or the 30% income tax. However, we have sought clarification on this from the government and we will approach them in this regard,” said Darshan Bathija, co-founder and managing director of Vauld, a Singapore-based cryptocurrency exchange.

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Crypto platform executives say that if there are no tax implications on crypto-based products, it could lead to greater demand from investors.

“It (the tax) will increase our operations because people will prefer to take a loan on their crypto wallet, instead of selling it to avoid tax implications,” said Kumar Gaurav, Founder and CEO of Cashaa, a platform online banking that handles both fiat and cryptocurrencies.

It will also boost long-term holders, who will use our savings account to generate passive income without trading, which will trigger TDS complications, Gaurav added.

There is no clarity on how the new tax will apply to crypto investments and whether it will impact returns on loans drawn against cryptocurrencies.

Given the volatile nature of crypto assets, investors may be more inclined towards products that offer stable returns.

“We have already launched a new product that will give up to 24% annual interest rate on stablecoins just by keeping it in our wallet. Soon we will see many startups tapping into this market, as bank interest rates in India are below 8%, but converting them to dollar-backed stablecoins can significantly increase the interest rate,” Gaurav said.

Stablecoins are cryptocurrencies whose value is derived from an underlying asset – the US dollar or gold.

The crypto market is becoming increasingly sophisticated as global players launch products like Exchange Traded Funds where even conservative investors can invest in cryptocurrencies without the vagaries of the inherent volatility of the digital asset. .

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