The latest income tax rule set by the government regarding cryptocurrencies, which came into effect from the beginning of July, has come down heavily for the crypto exchanges in India, as per a report. Much true to their warning, Indian cryptocurrency exchanges are witnessing a downfall of volumes on their platforms as investors are backing off ever since the government implemented the new rule of levying TDS on cryptocurrencies in an order to regulate these transactions. Under the new rule, the buyer of a virtual digital asset or cryptocurrency has to pay 1 per cent tax deducted at source (TDS) of the amount paid to the seller.
Crypto Trading Goes for a Toss
According to the report by Bloomberg quoting CoinGecko, three leading crypto exchanges in India — ZebPay, WazirX and CoinDCX, saw a plunge of 60 to 87 per cent in their value of daily trading since the government started to levy the 1 per cent TDS on cryptos from July 1. Another exchange, named Giottus, saw its trading suffer a decline of 70 per cent, its chief executive was quoted as saying.
This was also fuelled by a general negativity in trading amid a combination of plunging prices, difficulties in withdrawal and an overall depressing sentiment -in the once-soaring market.
WazirX, a trading platform backed by Binance, did $3.8 million worth of trading on July 2, as per Bloomberg. In early July last year, WazirX would have traded this amount for less than two hours, the report said. As per the platform’s vice president Rajagopal Menon, while long-term crypto holders are still buying and selling, high-frequency traders and market-makers are out of the scene. “Traders are also doing more peer-to-peer trading and migrating to so-called decentralized exchanges,” Menon was quoted as saying.
Survey Indicates Negative Sentiments
As per a survey conducted by WazirX and ZebPay that included 9,500 respondents, 83 per cent of traders believed that the recent tax implementation deterred their trading frequency. “In addition, around 24 per cent of respondents are contemplating shifting their trading activities to international exchanges owing to the high taxation. Further, 29 per cent of the respondents traded lesser than the pre-tax period,” said the survey.
According to the survey, 27 per cent of the respondents sold over 50 per cent of their portfolio before 1st April, whereas 57 per cent sold under 10 per cent. In the current scenario, revenue from tax collections for the government will decline as 27 per cent of customers (34 per cent traders and 23 per cent holders) said they will trade less than earlier owing to the current taxation policy.
The government during the Budget session in February introduced a tax regime for virtual digital assets, including cryptocurrencies, that consists of a TDS and another 30 per cent tax on income from crypto and other digital assets. While the 30 per cent income tax rule came into effect from April 1, the TDS provision became effective from July 1 this year.