The Imposition Of Additional Taxes In India, Makes Crypto Trading Drop 72.5 Percent

JAKARTA - Trading volume on India's three major crypto exchanges has fallen by an average of 72.5% since July 1. This occurs following the imposition of a 1% tax per transaction imposed in the country.

The Tax Deducted at Source (TDS) went into effect on July 1 and appears to have negatively affected traders as exchange volume fell from 37.4% on BitBNS and 90.9% on CoinDCX on July 3. Volume has stabilized slightly since hitting lows but is still down by an average of 56.8%, according to CoinGecko.

India's YouTube channel Crypto India tweeted on July 4 that the exchange's earnings, based on 0.1% trading fees, were very poor due to low volume levels. At the lowest volume level, WazirX, CoinDCX, and Zebpay received a combined $21.649 per day.

For now, crypto traders like Shounak Shetty from Mumbai are also hurting. Shetty told the Economic Times on July 4 that they believe TDS and a 30% income tax on cryptocurrency trading in India will hurt the talent base in the South Asian country.

“Like other traders, I am trying to figure out if it is possible to stay profitable on the Indian exchange. This will cause another brain drain from professional traders to other countries like Dubai which are more welcoming,” said Shetty, as quoted by Cointelegraph.

WazirX Policy Analyst, Anuj Chaudhary, also explained in the June 30 episode of the WazirX Show on YouTube that 1% TDS is imposed on “digital assets whether they are NFTs, crypto assets, metaverses or any transaction that takes place on top of a public blockchain.”

The tax will be in effect for three months as a test to determine its impact on the market. While trading volumes are low right now, policymakers want to see results for a longer timeframe.

Only gift cards are used to acquire goods or earn discounts, mileage points, reward points and loyalty incentives without monetary consideration, and subscriptions to websites, platforms or apps are exempt from taxes.

Chaudhary's partner on the show, Muthuswamy Iyer, Head of Legal at WazirX, accurately predicted that TDS would negatively impact high-volume, high-value traders on the Indian platform. He added that he believes TDS will also deter 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 US dollars (Rp 142.4 billion) per day, but it has dropped to around 5.6 million US dollars (Rp. 83 billion) on July 4.