In less than a week after the new income tax rules relating to cryptocurrency trading came into force, there is a buzz that blockchain enthusiasts and investors are gradually losing optimism and enthusiasm to invest in what is increasingly being referred to as ‘web3’.
Aditya Singh, founder of Crypto India, shared the impact of tax rules on his social media handle.
There is also a petition on change.org to urge Government of India to introduce reasonable crypto tax policies. So far, the petition has already been signed by 1.03 lakh petitioners. This shows the intensity of resistance among investors for taxes on cryptocurrency trading.
On the change.org petition, one crypto investor Nikhil Gupta wrote, “I have quit just because of this 30 percent tax and I want to join again so please reduce tax.”
Another user Jagith Jayan says, “I am a trader and this heavy tax is going to affect my daily earnings.”
Ankit Nain, another user wrote, “Tax should be minimised. We can't afford this.” Prasanth Y wrote, “This decision sends mixed signals to countries around the globe. While taxing allows people to trade and let the world know that India has forward thinking, the rate at which the tax is proposed does not inspire confidence. It shows that India wants to discourage people from using blockchain technology and the benefits that come with it.”
The change.org petition reads: “Crypto Industry has been actively seeking regulations. The proposals ..in Budget 2022 placed crypto at the same footing against social evils like Betting and gambling. This can have a devastating impact not only on the industry per se but the economy as a whole.”
“Crypto Industry should not be treated at the same footing as those of the betting and gambling industry. Crypto not only includes speculation on assets by traders per se but also encompasses and explores various use cases of the underlying technology,” reads the petition further.
The key appeal made in the petition is this: “Current proposed tax rate at 30% under section 115BBH to be brought in line with section 111A and Section 112A i.e., tax rate as applicable to stock market transactions,” the petition reads.
Aditya Singh claims that exchanges saw drop in volumes after crypto tax rules became effective on April 1, 2022.
Herein he gave charts for four crypto exchanges to bring home the point that the volumes have suffered.
Some crypto exchange leaders, meanwhile, argue that there is no noticeable drop in the trading volume at their platforms - at least not immediately.
Ashish Singhal, Founder and CEO of CoinSwitch says: “We are a retail platform and haven't seen an immediate and significant drop in our trading volume since most of our investors are seeing cryptos as an asset that appreciates over time.”
He, however, gives an indication that the TDS could leave some impact on high-frequency traders.
“High-frequency traders provide liquidity in the crypto market, enabling efficient buying and selling of assets. These traders operate on extremely thin margins, and locking up their capital with high TDS will restrict their ability to operate, lowering market liquidity and eventually impacting retail investors,” he adds.