Indian Crypto Traders: 30% Income Tax and 1% Transaction Fee

Indian crypto traders may be abandoning hope because they have to now include a 30% income tax and a 1% transaction fee on every transaction on their exchanges, which is forcing exchange volume to plummet.

Three major Indian crypto exchanges saw their trading volume plummet by an average of 72.5% since July 1, when a 1% tax per transaction was imposed in the country.

On July 1, the Tax Deducted at Source (TDS) came into effect and it seems to have negatively affected traders as exchange volumes fell from 37.4% on BitBNS and 90.9% on CoinDCX by July 3. Volumes have remained low since hitting their lowest point but they are still down 56.8%, according to CoinGecko. 

On July 4, Indian YouTube channel Crypto India tweeted that exchange revenues, based on a 0.1% trading fee, are low due to the low volume levels. At the bottom of volume levels, WazirX, CoinDCX, and Zebpay made a combined $21,649 per day.

Shounak Shetty, a crypto trader from Mumbai, is also suffering. He told Economic Times on July 4 that he thinks the TDS and the 30% income tax on cryptocurrency trades in India will be detrimental to the talent base in India.

“Like other traders, I am trying to figure out if it’s possible to stay profitable on Indian exchanges. This will lead to another brain drain of professional traders to other countries like Dubai that are more welcoming.”

In the June 30 episode of The WazirX Show on YouTube, Policy Analyst Anuj Chaudhary explained that the 1% TDS is applied to "digital assets whether it's NFT, crypto assets, metaverse or any kind of transactions happening on top of public blockchains."

The tax will be in effect for three months to determine its impact on the market. During this time, policymakers want to see how it performs over a longer period of time.

The tax does not apply to gift cards that are used to purchase goods or get a discount, mileage points, reward points, and loyalty incentives.

Muthuswamy Iyer, the Head of Legal at WazirX, accurately predicted that the TDS would negatively impact high-volume, high-value traders on Indian platforms. He added that he believes the tax will also dissuade newcomers and low-frequency traders from gaining crypto exposure.

As of July 4, the average daily transaction volume between WazirX, Zebpay, BitBNS, and CoinDCX was about $5.6 million per day. That's down from a high of $9.6 million in June.