30% Tax Effect: Indian Crypto Exchange Trade Down by $3.8 Billion

• As per a study, 30% tax and 1% tax deducted at source caused a loss of over Rs 99.3 trillion of local exchange trade volume.
• The study said that Rs 25,300 crore were relocated in the first 6 months of FY23.
• Nearly 1.7M Indian investors have switched to foreign exchange because of taxes.

A recent study showed that after the imposition of a 30 percent tax on the income from crypto assets, the net trade volume worth $3.8 billion (Rs 32,000 crore) switched from Indian crypto exchanges to foreign ones between February to October.

The Esya Centre’s recent study said that both the 30% tax and 1% tax deducted at source may cause a loss of over Rs 99.3 trillion of local exchange trade volume in the coming four years.

The study titled “Virtual Digital Asset Tax Architecture in India” revealed that out of Rs 32,000 crore, Rs 25,300 crore were relocated in the first six months of 2022-23 (FY23).

The report read, “60.8 percent of the fall in the volumes of Indian centralized crypto exchanges are due to domestic market conditions or the tax architecture in India during Feb-Oct 2022, and the conditions intrinsic to these exchanges.”

The study pointed out clear proof that revealed that from February 2022, foreign centralized crypto exchanges gained an advantage over Indian centralized exchanges. Nearly 1.7 million Indian investors have switched to foreign exchange because of the domestic crypto tax structure.

As per the report, during July and September, downloads of domestic crypto exchange applications went down by 16% year on year. Meanwhile, downloads for foreign exchange apps have gone up by a considerable rate.

The report was brought up after considering data from Indian exchanges like WazirX, CoinDCX and Zebpay and foreign exchanges like Binance, Coinbase, and Kraken. CoinDCX has recommended the government reduce the TDS to 0.01%.