Indian Crypto Exchanges see a major drop in trading volumes post new tax rules

As the new 1% TDS on crypto trading kicked in on the 1st of July, trading volumes of cryptocurrency have dried up in India.

Various crypto exchanges, which include ZebPay, WazirX, and CoinDCX, have seen a 60-87% decline in trading volume since the tax regulations came into force on the 1st of July. The early signs show the fear of crypto exchanges coming to fruition.

Why does this story matter?

India’s crypto industry is going through a difficult phase. The 30% tax levied on profits arising out of the crypto transactions and the new 1% TDS has impacted the industry.

These, along with the plunging prices as well as difficulty getting cash into exchanges, are forcing market makers and high-frequency traders out of centralized exchanges.

Binance-backed WazirX saw a 74% decline in trading volume.

Crypto exchanges had earlier warned that the TDS would erode trading volume. Binance-backed WazirX’s trading volume dipped from $14.53 million on the 30th of June to $3.65 million on the 4th of July. CoinDCX saw a decline from $2.62 million on the 30th of June to $1.31 million on the 4th of June. Even BitBNS, which fared better than its counterparts, saw a 34% decrease in its trade volume from the 30th of June.

The onus of paying the TDS falls on the buyer.

The 1% TDS deduction on the virtual digital assets (VDA) announced in the 2022-2023 Union budget came into effect on the 1st of July. Accordingly, 1% tax will be levied on all VDA transactions with a consideration exceeding INR 10000. The obligation to pay the TDS falls on the person making the payment to the seller, which includes an individual buyer, broker or an exchange.

The tax could force traders to decentralized exchanges.

The contraction in crypto trading in India is not solely related to new taxes introduced by the government. The dip in volume experienced across the globe has also affected the Indian exchanges. Moreover, the sudden decline can be directly attributed to the TDS. Many fear that this may force traders to move to decentralized exchanges, which could be a heavy blow to the liquidity of the centralized exchanges.

Executive Opinion

“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 of WazirX.

Does trading on foreign exchanges attract TDS?

Trading on foreign crypto exchanges does not absolve Indian traders of their TDS obligation. Since foreign exchanges do not deduct TDS, the responsibility falls on the Indian trader to pay the TDS.

Disclaimer: Blockmanity is a news portal and does not provide any financial advice. Blockmanity’s role is to inform the cryptocurrency and blockchain community about what’s going on in this space. Please do your own due diligence before making any investment. Blockmanity won’t be responsible for any loss of funds.

Get the latest news on Blockchain only on Blockmanity.com. Subscribe to us on Google news and do follow us on Twitter @Blockmanity

Did you like the news you just read? Please leave a feedback to help us serve you better


Source