Indian crypto-trading volumes are falling after high taxes

by · July 4, 2022

The trading volume of three major Indian crypto exchanges fell by an average of 72.5% since July 1, when a tax of 1% per transaction was enforced in the country.

Tax Deducted at Source (TDS) came into force on 1 July and appears to have affected traders negatively as stock volumes fell from 37.4% on BitBNS and 90.9% on CoinDCX by 3 July. Volumes have stabilized slightly since reaching their lowest levels, but are still down 56.8% on average, according to CoinGecko.

The Indian YouTube channel Crypto India tweeted on July 4 that stock market earnings, based on a trading fee of 0.1%, are appalling due to the low volume levels. At the bottom of volume levels, WazirX, CoinDCX and Zebpay raised a total of $ 21,649 per day.

For now, crypto traders like Mumbai’s Shounak Shetty are also hurting. Shetty told the Economic Times on July 4 that he believes TDS and 30% income tax on cryptocurrency trading in India will be detrimental to the talent base of the South Asian nation. He said,

“Like other traders, I try to find out if it is possible to stay profitable on Indian stock exchanges. This will lead to yet another brain drain of professional traders to other countries like Dubai.”

WazirX’s policy analyst Anuj Chaudhary explained in the June 30 episode of The WazirX Show on YouTube that 1% TDS is imposed on “digital assets whether it is NFT, cryptocurrencies, metaverse or any type of transaction that takes place at the top of public blockchains.”

The tax will be in force for three months as a test to determine what effect it has on the market. While trading volumes are low now, decision makers want to see results for a longer time frame.

Only gift cards used to obtain goods or receive discounts, mileage points, reward points and loyalty incentives without monetary considerations, and subscriptions to websites, platforms or applications are exempt from the tax.

Related: The Reserve Bank of India ranks crypto near the bottom of systemic risks despite harsh criticism

Chaudhary’s counterpart on the show, Muthuswamy Iyer, Head of Legal at WazirX, accurately predicted that TDS would have a negative impact on high-volume, high-value traders on Indian platforms. He added that he believes that TDS will also discourage newcomers and low-frequency traders from gaining crypto exposure.

The average daily transaction volume between WazirX, Zebpay, BitBNS and CoinDCX in June was around $ 9.6 million per day, but has dropped to around $ 5.6 million as of July 4th.