Trading volume of Indian crypto exchanges have dropped significantly after new tax laws on crypto traders were imposed. Starting July 1, 1% TDS was imposed for all crypto traders on all Indian crypto exchanges. If you are trading 100 INR, 1 INR would be deducted as TDS. And for daily traders, 1% TDS does not make any sense, as it depletes their trading volume. For anyone who is trading 5 times a day, close to 5 percent is lost, and the trader is left with only 95 percent of what he had before starting trading, considering he made no profit no loss.
WazirX Trading Volume 2022: YTD
WazirX, which was doing more than 150M in trading volume even in April, 22, is now doing just over 2M. India’s largest crypto exchange has seen close to 99% drop.
CoinDCX Trading Volume 2022: YTD
CoinDCX, India’s second largest crypto exchanges with is currently doing close to 1.5M in trading volume. Compared to WazirX, CoinDCX’s trading volume dropped from 17M to 1.5M before July till date.
Indian’s Users Rushing to International Crypto Exchanges to Avoid 1% TDS
According to a clarification by CBDT, it is exchanges’s responsibility to deduct 1% TDS. While all the major Indian crypto exchanges are abiding by it, international Crypto exchanges are not following it.
Most of the users, who were earlier trading on these exchanges may have moved to International exchanges to avoid 1% TDS. Top 2 crypto exchanges that benefitted from the new crypto tax rule, are Binance and Kucoin.
While Binance has made KYC mandatory for all users, Kucoin still allows users to trade without KYC verification.
And none of these crypto exchanges, deduct any TDS from their Indian users.
Binance alone saw more than 750,000 downloads in June and July in India, while Kucoin saw more than 200,000 downloads in the same time frame.
Kucoin in a recent survey said, more than 115 Millions Indian users have traded cryptocurrencies till date. In the first half of 2022, Kucoin added more than 5.6Million Indian users alone. However, a thing to note here is the non KYC part. Any user can have multiple accounts with the exchange as KYC is not mandatory. So even though Kucoin has more more than 5.6Million signups on their platform in this year, the actual number of traders could be much lesser. None-the-less the number is still significant.
Crypto Bear Market Hitting Indian Exchanges Badly
On top of these, crypto bear market has hit the Indian exchanges badly. Indians lost a lot of wealth in crypto those who entered near the top of this 2019 to 2021 cycle. New investors who were heavily trading Dogecoin and Shib experience a major wealth erosion as these cryptocurrencies have seen more than 90 percent drop since the ATH.
Despite this, those who believe in the crypto Industry as a whole, a part of it has moved to International exchanges to avoid the Draconian crypto tax.
Government must realise it soon and should #reducecryptotaxes so that users come back to the Indian exchanges where GOI can keep a track on the trading volume and data.
ED on a post related to WazirX had mentioned that Binance Legal team takes forever to reply for any of their concerns. Had these trading have happened on the Indian crypto exchanges, these data could have been in the country.
Is it Fine to Trade on International Crypto Exchanges and Not pay the Taxes?
No matter where you trade, if you are an Indian citizen, and pay tax in India, you are required to abide by the rules and self report and pay taxes by yourself. If caught evading taxes, a heavy penalty may be imposed later on.
Read more on the new crypto tax rule 2022 here.
Who should pay the TDS if it is a P2p trade?
CBDR, in a circular released on 22 June clarified, it is the sellers responsibility to deduct TDS and deposit the same with the government as per the provisions laid out in Income tax rules, 1962.