Indian authorities have been cryptic in their stance on the legality of cryptocurrencies, but when the gains made on them were taxed, for tax deducted at source (TDS), it was a matter of alignment with the taxation law. Its impact has been enormous. Cryptocurrency trading volumes across all exchanges have fallen by as much as 80% since the TDS rule came into force on July 1. A drop was widely expected, but such a sharp drop is remarkable.
With the turmoil in the global crypto markets, their business may be hampered by speculation that the levy on price increases no longer makes them eligible for investment. The 30% tax on capital gains is the highest marginal rate levied in India. While 1% TDS indicates an additional procedural burden, its sudden squeeze of crypto trades suggests that a large number of tax doers were driven out of the market for fear of unaccounted assets coming under the tax radar, thanks to . Including TDS. It’s unsettling. Perhaps exchange volume will regain its former peak, but with a reversal of easy money policies and a string of crypto scams hollowing out portfolios, it could take some time.