Indian crypto exchanges have recorded a nosedive in trading volumes after the one percent TDS rule on each transaction went live on July 1. The average daily transaction volume on Indian exchanges WazirX, CoinDCX, BitBNS, and Zebpay reportedly dipped to $5.6 million (roughly Rs. 44 crore) in the last few days. Up until June, this volume was around $10 million (roughly Rs. 80 crore). India still has a long way to go before its crypto community completely adapts to the tax laws that have been announced around the virtual digital assets (VDA) industry.
By July 3, the trade volumes on BitBNS and CoinDCX crypto exchanges reportedly dropped by 37.4 percent and 90.9 percent respectively.
Indian crypto traders are struggling to see profits after paying a 30 percent tax on transactions of VDAs. This rule went live in April.
Now, starting this month, Indians have also begun to see one percent tax deductions on each crypto transaction. This essentially means that one percent TDS is being levied on every purchase and deposit of crypto assets, thus increasing the pressure on investors.
The government of India believes that by imposing one percent tax deducted at source (TDS) on each crypto transaction, it would be easier to keep a track of all transactions.
Not just on cryptocurrencies, this one percent TDS will also be charged on the transactions of other VDAs as well, such as non-fungible tokens (NFTs) and other metaverse elements.
Regardless, the Indian crypto community has time and again complained about this additional financial pressure on social media.
The outcry grew even louder after India's speculated future plans of levying a 28 percent Goods and Services Tax (GST) on crypto transactions began making the rounds in May.
These tax rules were announced by Indian Finance Minister Nirmala Sitharaman in February 2022.
Earlier this year, Indian authorities also said that they were not looking to provide any tax relaxations or benefits to crypto miners and other industry players who are likely to spend hefty amounts to keep the crypto ecosystem up and running.
These decisions are also being criticised for being unjust as the high cost of equipment needed for crypto mining is likely to keep a lot of people from experimenting with this new class of digital assets.
India still awaits a more detailed legal framework governing the crypto sector, work on which is ongoing under Sitharaman's supervision.
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