Crypto volume slump: Majority of traders ‘unhappy’ with new tax rules, say exchanges

Majority of the active crypto traders have issues with recent tax implementation, claims WazirX and Zebpay, citing their Trader Sentiment Survey. The survey included about 9,500 respondents throughout the country.

The domestic exchanges collectively conducted the survey and included only those traders who were active from the beginning of the year till April 15. The survey aims to highlight the mood of crypto traders over higher taxation.

According to the results, 83 per cent of traders believed that the recent tax implementation deterred their trading frequency. 29 per cent of the respondents said that they traded less than the pre-tax period.

About every fourth respondent is contemplating to shift their trading activities to international exchanges, thanks to higher taxation in India.

According to the survey, 27 per cent of the respondents sold over 50 per cent of their crypto holdings before the beginning of the new fiscal year, whereas 57 per cent booked profits in up to 10 per cent of their holdings.

The exchanges claimed that revenue from tax collections for the government is set to decline as 27 per cent of customers are set for lesser trade than earlier owing to the current taxation policy after the implementation of new norms.

Explaining the difference between the pool of traders and holders, exchanges in their note said that the traders were classified as those who traded every day, more than five times a week, or at least more than twice a week. On the other hand, long term investors are holders.

Avinash Shekhar, CEO of ZebPay, said, “The results indicate a considerable number of respondents intend to reduce their trade frequency and participation in the category. Restrictive policies serve as a barrier to both adoption and innovation.”

However, the report did not mention about the 1 per cent tax deducted at source or TDS norm, which became applicable from July 1 for all the crypto transactions in the country.

Not only this, the rule of 30 per cent taxation on the gains arising from the sale of virtual digital assets (VDAs) is applicable on the traders, with no exemption or benefit of indexation other than the cost of acquisition.

Both the rules were announced by the finance minister Nirmala Sitharaman in the Parliament, when she tabled the union budget on February 1, 2022.

Domestic exchanges, on multiple occasions and platforms, have criticised the higher tax norms levied by the government of India, which were announced earlier this year.

The exchange lobby has been constantly batting for a relaxed regulatory framework with lower taxations. However, their demand from the government goes unheard.

Rajagopal Menon, Vice President, WazirX, said that it is important that the regulations support the inclusive growth of all stakeholders involved. “The tax regime needs to be balanced to encourage participation and revive trading volumes.”

Adding more from the report, which indicated that the millennials traders or holders were more impacted compared to their senior counterparts.

Crypto exchanges fear losing their existing clientbase, which might migrate to international exchanges for better tax policies. If this comes true, Indian crypto exchanges might lose a big chunk of customers. It is a no-brainer that the volumes of the crypto exchange have taken a big hit since the application of new rules, which added more to their woes.

Taaran Chanana, MD and Co-Founder, MemeChat said that investors would lose 1 per cent on every trade leading to a crippling effect on the capital. “However, this will help in tracking every crypto trade and arresting tax evasions,” he added.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)

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