Bitcoin ETF Approval: Investment Opportunity For Indian Investors
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| Bitcoin ETF Approval: Investment Opportunity For Indian Investors |
The recent approval of spot bitcoin exchange-traded funds (ETFs) by the Securities Exchange Commission (SEC) in the United States has opened doors for Indian investors to explore crypto asset investment opportunities. This development not only expands investment options but also holds potential taxation benefits for Indian investors.
Investing via Liberalized Remittance Scheme (LRS)
Indian investors can now utilize the Liberalized Remittance Scheme (LRS) to transfer funds internationally, enabling participation in foreign stock and ETF markets. Regulated by the Reserve Bank of India, the LRS allows investors from India to allocate up to $250,000 for investments, including in US ETFs.
However, it's crucial to note that LRS guidelines explicitly prohibit remittances solely for trading purposes in the US stock market or any other foreign market.
Tax Implications and Benefits
Viram Shah further highlighted that the 1% TDS on transactions would not be applicable, given the absence of actual crypto purchases, and capital gains tax would be lower. However, the introduction of the 20% TCS in 2023 on deposits above INR 7 Lakhs via LRS could lead to liquidity constraints. Despite its potential offset against other tax liabilities, it might restrict liquidity. Additionally, investors need to consider management fees as an additional cost.
US Regulatory Approval and Institutional Investments
On January 10, the US regulatory body overseeing capital markets approved 11 spot Bitcoin ETFs, including offerings from major financial institutions such as BlackRock, Vanguard, Franklin Templeton, Valkyrie, Fidelity, and Invesco.
Sidharth Sogani, CEO of cryptocurrency research firm Crebaco Global, anticipates a substantial influx of institutional investments, estimating about $5 billion flowing in through ETFs in the next 45 days. He believes that ETFs will contribute to stabilizing Bitcoin prices by reducing liquidity risks over time.
Impact of Union Budget 2022 on India's Cryptocurrency Market
The landscape of India's cryptocurrency market saw significant changes due to the taxation regulations implemented in the Union Budget 2022. The regulatory changes implemented included a 30% income tax on profits and an additional 1% tax deducted at source (TDS) on all cryptocurrency trades.
Conclusion
The approval of Bitcoin ETFs in the US presents a strategic avenue for Indian investors, offering diversified investment opportunities through the LRS framework while navigating tax implications and benefiting from increased stability in the cryptocurrency market.
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