April 12, 2022
By Anjali Kochhar
A new report states that cryptocurrency trading volumes of India’s major exchanges have dipped sharply since April 1, the day a new tax on crypto profits came into effect.
Quoting data collected by Crebaco, a crypto research firm, a CoinDesk report noted a drop of 72% on WazirX, 59% on ZebPay, 52% on CoinDCX and 41% on BitBns. The trading volumes were measured in U.S. dollars.
Lok Sabha, the lower house of Indian parliament, passed the Finance Bill 2022 on March 25, which levies a 30% tax on virtual digital assets effective April 1. This means that any income from the transfer of cryptocurrencies will be taxed.
The amended bill proposed that any losses from the transfer of virtual assets will not be allowed to be set off against the income arising from the transfer of another virtual asset.
The bill also proposed a 1% Tax Deductible at Source (TDS) on payments towards virtual currencies over Rs 10,000 in a year and taxation of such gifts in the hands of the recipient.
However, it is too early to say that the drop in trading volumes is because of the new tax law as the drop in volumes on Indian exchanges is largely in line with a global trend.
“April 1, 2, and 3 were holidays. Since then, volumes are continuing to fall. I don’t think this will return,” Crebaco CEO Sidharth Sogani said in the research report.
“This has created a new benchmark. It can go further down or sideways, but it is unlikely to go back up. It is clear that the new tax has impacted the market negatively. The government must look into this, and because there is no way to stop this (crypto), the government should embrace the technology,” he said.
Wazir X CEO Nischal Shetty also noted that regulating cryptos is a prerequisite for the industry to flourish, but the current bill lays down parameters that could reduce participation and increase inefficiencies.
“The Indian exchanges are KYC (Know your customer)-compliant and ensure that the transactions are secure, guaranteeing that the traders are protected against any security threat. However, due to current taxation laws, there is a possibility for them to shift their capital to unregulated or decentralized P2P or foreign exchanges,” Shetty told Blockchain Asset Review in an exclusive interview.
“This could become a challenge not only for the exchanges but also for the government to get revenue from taxes. But the larger implication will be the disadvantage to the Web3 space where it will intercept innovation and job creation as entrepreneurs will move to countries with more friendly policies and taxes towards crypto,” he added.
Other industry leaders had also voiced similar concerns. Shivam Thakral, CEO of BuyUcoin, said that implementing a single tax for a single crypto rule will be a “massive blow” to the crypto industry in the country.
“If an investor buys Bitcoin in April and sells it at a loss and an investor again buys a Bitcoin in July and sells it at a profit within the same financial year, how will that scenario play out? That’s the reason we have urged the regulators to take a nuanced approach towards crypto and discuss it with the industry stakeholders before arriving at a final decision,” Thakral told Blockchain Asset Review in March.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.