24.1 C
New Delhi
Wednesday, May 31, 2023
HomeNewsTDS on crypto: Trading volumes take a hit

TDS on crypto: Trading volumes take a hit

Days after the Centre introduced tax deducted at source (TDS) on virtual digital assets and cryptos for transactions over 10,000, trading volumes on major Indian exchanges have taken a massive hit.

Trading volumes on WazirX were down about 83% on July 3, compared to the volumes registered on June 30, while volumes on CoinDCX, ZebPay, and Bitbns were down 70%, 76%, and over 18% respectively, according to data sourced from research services provider Crebaco.

According to rules finalized by the Central government, it is mandatory for a buyer to deduct 1% TDS on the amount payable to sellers of digital assets when the transaction amount exceeds 10,000.

Sidharth Sogani, founder and CEO of Crebaco told LiveMint that volumes have also dropped due to the global broader financial markets sentiments and that in India, liquidity providers have backed out, leading to substantial drops.

“I believe there is more pain to come in the coming 2-3 months as factors like an impending recession, and the war in Ukraine are only adding to the negative sentiments. The government in India is not doing anything to help the space. Usually, the government comes forward to help industries survive difficult phases. But the government is wrapping the crypto space in shackles making things difficult for the players. I am not very positive on how things will shape up, but maybe in the near future we will have a better picture,” Sogani said.

Raj Kapoor, founder of India Blockchain Alliance said levying 1% TDS will not only discourage entrepreneurs and investors from developing the rapidly evolving industry, but the government too will be at a loss as it will lose out on an opportunity to earn major tax revenue due to reduced transaction volumes in the space.

Giving statistics, he said over 90% of users trade at least 10 times and over 80 % trade at least 20 times in a month and that the TDS implementation will affect not just the users, but the government as well.

“This will lead to an exodus of start-ups, entrepreneurs and professionals, further hampering the growth of a growing industry worldwide that has the potential to contribute significantly to India’s stressed economy,” Kapoor said.

Experts also point out that crypto investors are more likely to move away from KYC-compliant centralized exchanges, and much of the trading activity eventually will be driven underground, making compliance enforcement an arduous task for tax authorities.

“Contagion in crypto markets has driven investors away. Onerous taxation and compliance regime will increase investors’ exodus and make running a crypto business more challenging. Likes of Vauld are struggling to stay afloat and have paused withdrawals. This crypto winter is going to be more painful and a longer one. We might see more consolidation in the space. Those with deep pockets like FTX will make strategic bets on crypto entities,” Sharat Chandra VP – Research & Strategy, EarthID, said.

Crypto trading and lending platform Vauld on Monday announced it was suspending withdrawals, trading, and deposits on its platform, due to the financial challenges it was facing on account of volatile market conditions and financial difficulties of its business partners.

Ironically, the Singapore-based firm, with most of its employees in India, had asserted a couple of weeks back that it did not have any exposure to Celsius or Three Arrows Capital and that it remained liquid despite market conditions.

Source link

Our Archieves