Indian Crypto Trading Volumes Collapse on Heavy Taxes

Indian crypto traders may give up as they now face a 30% income tax and a 1% tax per trade on crypto transactions, forcing trading volume to plummet.

Trading volume on three major Indian cryptocurrency exchanges has fallen by an average of 72.5% since July 1, when a 1% tax per transaction was imposed in the country.

The withholding tax (TDS) came into effect on July 1 and appears to have negatively affected traders, with trading volumes dropping 37.4% on BitBNS and 90.9% on CoinDCX as of July 3. Volumes have stabilized slightly since hitting lows, but are still down. 56.8% on average, according to CoinGecko.

Indian YouTube channel Crypto India tweeted on July 4 that exchange revenue, based on a 0.1% trading fee, is abysmal due to low volume levels. At low volume levels, WazirX, CoinDCX, and Zebpay took in $21,649 per day.

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

Like other traders, I am trying to figure out if it is possible to stay profitable on Indian exchanges. This will lead to another brain drain of professional traders to other countries like Dubai which are more welcoming.

WazirX Policy Analyst Anuj Chaudhary explained on the June 30 episode of The WazirX Show on YouTube that the 1% TDS is levied on “digital assets, whether NFT, ‘cryptocurrency, metaverse or any kind of transactions taking place on top of public blockchains’.

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

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

Chaudhary’s counterpart on the show, Muthuswamy Iyer, Head of Legal at WazirX, accurately predicted that TDS would negatively impact high-volume, high-value traders on Indian platforms. He added that he believed TDS would also deter newcomers and low-frequency traders from gaining exposure to the cryptocurrency.

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

Leave a Comment