Crypto tax discourages 83 percent of Indian investors from trading crypto.
In the midst of a merciless bear market, it appears that the majority of Indian investors have chosen to hibernate with two consecutive taxes poised to nibble away at their holdings.
India is a case study for the effects that anti-crypto policies might have on a booming economy. A research from WazirX highlights a shift in investor mood as the Indian government implemented its second crypto law, 1 percent tax deduction at source (TDS) on every cryptocurrency transaction, which supports the sharp decrease in trading volumes across all Indian crypto exchanges.
Since the country's introduction of a rule that would tax investors 30% on unrealized gains, trading volumes on Indian cryptocurrency exchanges have eventually decreased by 90%. In the midst of a merciless bear market, it appears that the majority of Indian investors have chosen to hibernate with two consecutive taxes poised to nibble away at their holdings.
To better assess investor mood, prominent Indian cryptocurrency exchanges WazirX and Zebpay polled almost 9,000 active traders from the area. Unsurprisingly, the poll found that 83% of traders had to cut back on how frequently they traded as a result of TDS deductions. Selling their interests prior to the taxation becoming law was another way for investors in India to avoid paying TDS. More than 25% of investors, the majority of whom were millennials, sold 50% or less of their holdings before April 1 compared to 55% who sold less than 10%. In this regard, Rajagopal Menon, VP of WazirX, remarked that the survey's findings indicated the need to change a few things in order to encourage the rise of cryptocurrency investors in the nation, which will lead to economic prosperity. To boost trading volumes and promote participation, the tax system needs to be balanced.
The risks of trading on non-KYC compliant exchanges with little to no regulation come with Indian investors looking to international exchanges as a way to avoid taxes. Avinash Shekhar, CEO of ZebPay, added:
"While India's crypto tax policy is a step in the right direction, some parts should be given another look in order to create a more welcoming regulatory environment for all industry participants and, ultimately, advance the nation's economy."
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Out of the total, roughly 2,300 investors, or 24 percent, stated that they were interested in testing out foreign cryptocurrency exchanges to avoid paying TDS during trade cycles, and 29 percent acknowledged that they had significantly limited their trading activity.
