About 83% of traders believe that the government’s decision to levy 1% Tax Deducted at Source (TDS) on transactions involving digital assets has deterred their trading frequency, according to a survey.
Also, around 24% of respondents are contemplating shifting their trading activities to international exchanges owing to the high taxation, a survey jointly conducted by Indian crypto exchanges WazirX and Zebpay points out.
According to rules finalized by the Indian government, it is mandatory for a buyer to deduct 1% TDS on the amount payable to sellers of digital assets, including Bitcoin BTC/USD and Ethereum ETH/USD, when the transaction amount exceeds $167 starting July 1, 2022.
The move follows the decision of the government to levy a flat 30% income tax on digital assets from April 1, 2022.
The Trader Sentiment Survey involved 9,500 traders, who have actively traded from the beginning of the year, until April 15, 2022.
According to the survey, 27% of the respondents sold over 50% of their portfolios before April 1, while 57% sold under 10% of their portfolios.
Exchanges seek reforms
Rajagopal Menon, Vice President, WazirX, said it was important that regulations support the inclusive growth of all stakeholders involved.
“The survey results stipulate the need to reform certain conditions to aid the growth of crypto investors in the country, which will result in economic prosperity. The tax regime needs to be balanced to encourage participation and revive trading volumes,” he said.
Millennials worst impacted
The report further indicates that millennials were far more impacted as compared to their senior counterparts.
28% of the respondents aged 18 and 35 sold more than 50% of their holdings before April 1 and 23% sought to move their holdings to an international exchange to avail a more favorable tax climate.
The holders had continued to retain their positions, with 45% saying they would hold on to their crypto, signifying their faith that the tax provisions will be made more conducive in the longer term.
Cryptos driving revolutionary change
Avinash Shekhar, CEO of ZebPay, said cryptocurrencies are driving revolutionary change across the world, and it is in India’s interest to encourage, not dissuade participation.
“Restrictive policies serve as a barrier to both adoption and innovation. While India’s crypto tax policy is a step forward, reconsidering certain aspects will help build a more supportive regulatory environment for all industry stakeholders and will ultimately contribute to overall economic progress,” Shekhar said.