A 30% taxation on income from cryptocurrency and other virtual assets, was followed with the government’s decision to add a one percent tax deductible at source (TDS) on cryptocurrency transactions from July 1, this year. Even as this appeared as the first step towards regularising the sector, it is felt that the industry is reeling under an adverse impact of such steps. “From the perspective of cryptocurrency trading volume, it has dropped. The implementation of these tax laws has caused the stagnancy of Indian cryptocurrency markets. Prices are also getting lower. Short-term and day traders will get affected due to the implementation of the one percent TDS,” Shivam Thakral, CEO, BuyUcoin, told FE Online.
Industry expert opined that the move by the government will ward off investment from international players. According to Anndy Lian, chairman, BigONE exchange, this will affect the market’s liquidity and foreign investors will look to stay away from Indian markets. “It will not be sustainable for investors in the long run. Active traders will get adversely affected as it would decrease day time trading. The overall market conditions would deteriorate, as more Indian cryptocurrency exchanges will look to settle outside,” he added.
Even as multiple discussions continue to revolve around the need to regularise the sector, with set policy framework, Indian exchanges still remain uncertain of the immediate impact. According to Gaurav Dahake, CEO, Bitbns, from an implementation standpoint, it is still not clear as to whether the exchange or buyer would be responsible for deducting the tax. “I think trading volumes have gone down by 40%, post the 30% taxation implementation. We are still asking the government how it plans to put the new taxation into action,” he added.
What is to be noted that due to looming uncertainty over regulations and policies, a few companies have already shifted base to other markets such as Dubai. “The transition of Indian exchanges will have an impact on the overall cryptocurrency scenario within a year. I think the Indian government will see a huge efflux of cryptocurrency investors and developers in the near future,” Lian said.