According to a report, the government’s most recent income tax rule on cryptocurrencies, which went into effect at the beginning of July, has been harsh on Indian crypto exchanges. True to their warning, Indian cryptocurrency exchanges are seeing a drop in volumes on their platforms as investors withdraw since the government implemented the new rule of levying TDS on cryptocurrencies in order to regulate these transactions. The buyer of a virtual digital asset or cryptocurrency must pay 1% tax deducted at source (TDS) of the amount paid to the seller under the new rule.
Crypto Trading is in jeopardy
According to a Bloomberg report citing CoinGecko, the value of daily trading on three leading crypto exchanges in India — ZebPay, WazirX, and CoinDCX — has dropped by 60 to 87 percent since the government began levying the 1% TDS on cryptos on July 1. Another exchange, Giottus, saw a 70% drop in trading, according to its chief executive.
This was also fueled by a general lack of optimism in trading as a result of a combination of falling prices, withdrawal difficulties, and overall depressing sentiment in the once-soaring market.
According to Bloomberg, WazirX, a Binance-backed trading platform, transacted $3.8 million on July 2. According to the report, WazirX would have traded this amount for less than two hours in early July of last year. According to the platform’s vice president Rajagopal Menon, while long-term crypto holders continue to buy and sell, high-frequency traders and market-makers have left the scene. “Traders are also doing more peer-to-peer trading and migrating to so-called decentralized exchanges,” according to Menon.
Negative Sentiment Found in Survey
According to a survey of 9,500 traders conducted by WazirX and ZebPay, 83% of traders believe that the recent tax implementation has reduced their trading frequency. In addition, because of the high taxation, approximately 24% of respondents are considering shifting their trading activities to international exchanges. Furthermore, 29% of respondents traded less than they did before taxes, according to the survey.
According to the survey, 27% of respondents sold more than 50% of their portfolio before April 1st, while 57% sold less than 10%. In the current scenario, the government’s revenue from tax collections will decrease because 27% of customers (34 % traders and 23% holders) said they will trade less than before due to the current taxation policy.
During the February Budget session, the government introduced a tax regime for virtual digital assets, including cryptocurrencies, that includes a TDS and a 30% tax on income from crypto and other digital assets. While the 30% income tax rule went into effect on April 1, this year’s TDS provision went into effect on July 1.
