Indian crypto exchanges have recorded a massive drop in their daily trading volumes since the 1% tax-deductible at source became effective on July 1, as per Coingecko. Trading platforms in the receiving ends are ZebPay, WazirX, CoinDCX, and Giottus.
Since transaction fees are a major income source for crypto exchanges, the fall in trading volume only adds to the woes of these firms.
The TDS rule states that all trades involving the sale and transfer of digital assets will be charged a 1 percent fee on the seller’s end. This means that the seller will receive 1 percent lesser than the total proceeds of the sale.
Indian crypto proponents have been vocal against the new provisions and warned that it will severely jeopardize crypto trading in India, especially with the current market slump.
Sumit Gupta, co-founder and CEO at CoinDCX, numerous times stated that this tax “would do more harm than good.”
However, a few experts believe it is too early to determine the full effect of the new TDS rules “At present, it is still premature to predict the ramifications of TDS. We will be in a better position to understand this by the second week of July,” said Rajagopal Menon, vice president at WazirX.
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While long-term crypto holders are still buying and selling, market makers and high-frequency traders are “gone,” Menon added. Traders are also doing more peer-to-peer trading and migrating to so-called decentralized exchanges, he said.
On the other hand, some analysts view the TDS rule from a positive angle. Shivam Thakral, CEO of crypto exchange BuyUcoin stated,
“Investors can trade now with confidence by paying applicable taxes and crypto entrepreneurs in India can conduct their business without any fear.”
Earlier in February, the Indian government introduced a tax regime for digital assets, that included the TDS and a flat 30% tax on income from crypto investments.
The crypto industry has been currently engulfed in a market downturned that began at the end of December 2021. As a result, several Indian crypto exchanges have slowed down their hiring initiatives to cut down operating costs.