“Paying 1 per cent TDS on every trade is just not done. Crypto is already so volatile, and on top of that, the tax implementation has made it difficult for traders to put their money in cryptos,” Anshul Sharma, 25, a crypto trader based in Mumbai tells indianexpress.com. Like Sharma, many traders have stopped trading after the Indian government introduced the concept of tax deducted at source (TDS) on virtual digital assets and cryptos for transactions over Rs 10,000.
“I have withdrawn all my money from exchanges because there is no point in swing trading anymore. I can’t afford to lose 1 per cent on each trade I make,” said Akshay Golellu, 24, an intra-day crypto trader based in Pune.
As investors lose interest in cryptos after the July 1 TDS implementation, Indian crypto exchanges are witnessing low-trading volumes. “Investors and traders do not have the confidence to invest anymore. This has come after the TDS implementation. Several exchanges are seeing their volumes trade plunge more than 50 per cent.” Sathvik Vishwanathan CEO of crypto exchange Unocoin told indianexpress.com.
WazirX saw trading volumes plummet by 70 per cent, falling from $14.13 million on June 30, 2022 (before the TDS enforcement) to $4.14 million on July 4, 2022, according to data received from the Coingecko market tracker. “The implementation of TDS has collapsed the crypto trading volumes as the majority of retail investors are flocking from Indian exchanges to avoid the 1 per cent TDS rules and are going to foreign non-KYC compliant exchanges,” Rajagopal Menon, Vice President at WazirX said to indianexpress.com while noting that other factors responsible for plunging trading volumes are: “global crypto market fall, non-availability of banks for fund deposit and the growing regulatory uncertainty.”
In apprehension of the 1 per cent TDS kicking in, the trading volume on CoinDCX slipped from $10.32 million to $1.44 million between June 30 and July 4, 2022, amounting to an overall drop of 86 per cent. This makes it the worst-hit crypto exchange.
“In India, KYC-compliant exchanges and platforms have established a framework for complying with the TDS as per the government notification. However, this compliance may not apply in the grey market where there is no visibility over the real identity of the user or the scale of transactions. The fear is high TDS may disincentivise users from trading within KYC-compliant platforms,” said Ashish Singhal, co-founder and CEO of CoinSwitch.
According to Vishwanathan, “a similar pattern was observed after the 30 per cent tax implementation in April as well. The trading volumes “might come back to normal in the next two weeks,” he said.
TDS provisions are applicable from July 1, 2022. This means any trades executed before July 1 won’t lie under the onus of dedications. It should be noted that if you have placed orders before July 1 2022, but the trade happens on or after the 1st of July 2022, the TDS provisions will still apply.