The news of India's crypto tax on cryptocurrency and NFT transactions has been a huge blow to traders, with over 83% claiming they are now less frequent trading. This is according to a survey carried out by crypto exchanges WazirX and Zebpay.
The survey shared with the press included 9500 respondents who had actively traded between January 1 and April 15th of this year. The respondents were divided into traders and holders. The traders were those who traded daily, more than five times a week, or at least over twice in one week while holders are those who invested for a long time.
The 30% tax on cryptocurrency trading implemented on April 1st caused an immediate dip in volumes across Indian exchanges. The number of WazirX daily trading volumes fell dramatically, with a 79% decline between March 31st ($163.41 million) and April 30 ($33.97 million).
It is undeniable that the new 1% crypto tax that came into effect on July 1 has caused trading volumes to decrease even further.
Rajagopal Menon, Vice President at WazirX, said:
"It is important that the 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."
The recent survey found that 24% of respondents are thinking about moving their trading activity to international exchanges due to the high taxes. But, WazirX founder and CEO Nischal Shetty said that trading on international exchanges does not exempt traders from paying the 1% tax — it merely makes them responsible for paying it directly. Also, traders are required to report their trading activity for the 30% tax.
The survey results show that around 29% of respondents said they traded less after the tax came into effect. In addition, 34% of traders and 23% of holders said they would trade less because of the taxes.
The tax on cryptocurrency has made traders think twice about their investments, with 27% saying they sold over 50%. However, 57 % decreased how much of a portfolio they own by less than 10%.
The results of this survey show that younger investors were impacted more than their older counterparts, as 28% percent between the ages 18 and 35 sold over 50% of their holdings before April 1st.
However, 45% of holders still have hope that the taxation policy will become more favorable over time, with many expressing confidence in future governments to change for the better.
Commenting on the survey findings, ZebPay CEO Avinash Shekhar said:
"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."
The taxation on cryptocurrency could leave India's crypto-economy in ruins and drive more professionals to relocate.
It was originally thought that the tax would give cryptocurrencies more legitimacy, but Finance Minister Nirmala Sitharaman has since said this isn't true.
India's cryptocurrency regulation bill has been delayed indefinitely. India's finance minister has said that while the country will not shut its doors on crypto, it is still calling for a blanket ban from the government.