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Cryptocurrency trading across Indian exchanges have plummeted after the new TDS (tax deducted at source) came into effect this July 1.
The controversial 1% TDS on crypto transactions exceeding 10,000 rupees is now a rule in India. The TDS comes on top of the 30% gains tax on crypto which became law earlier in April.
Citing data from research firm Crebaco, the Mint reported on Monday that trading volumes on major Indian crypto exchanges Wazirx, Coindcx, Zebpay, plunged about 83%, 70%, 76% respectively.
According to Crebaco the drop in crypto trading activity is also a result of sentiments in the global financial markets. In addition, large liquidity providers have stepped out of India.
Sumit Gupta, CEO of Coindcx, issued a warning:
“With 1% TDS, trading frequency is likely to drop in just 7 months. And volumes are expected to go down in 10 months.”
The 1% TDS has caused some confusion among Indian traders, including when using foreign cryptocurrency exchanges. Wazirx founder Nischal Shetty commented on that matter:
“There has been misinformation spread by some that trading on foreign exchange does not attract TDS. That is incorrect.”
If exchanges do not withhold TDS, the traders themselves are responsible for paying the India’s Income Tax Department, Shetty added:
“Please be aware of this as you will end up having a huge TDS amount pending for payment if you trade on foreign exchanges and do not pay TDS.”