27% of crypto investors sold over 50% of their portfolio before 1 April: Survey

The recent 30% tax implementation on gains from crypto assets led to 27% of the investors offloading more than 50% of their portfolio before 1 April, while 57% respondents sold under 10%, a joint survey by crypto exchanges WazirX and Zebpay has revealed.

Finance Act 2022 brought in a blanket tax rate of 30% on gains arising from trading of virtual digital assets or crypto assets, irrespective of the individual’s tax slab. Further, the investors in this asset class cannot offset or carry forward their losses.

Revealing the extent of impact of the latest tax provisions, the Trader Sentiment Survey involving 9,500 respondents said that 83% of the traders believed that the recent tax implementation deterred their trading frequency.

In addition, around 24% of the respondents were contemplating shifting their trading activities to international exchanges owing to the high taxation. Further, 29% of the respondents traded lesser than the pre-tax period.

The respondents only involved traders who actively traded from the starting of the year till 15 April 2022.

According to the survey, in the current scenario, revenue from tax collections for the government will decline as 27% of customers (34% traders and 23% holders) said that they will trade less than earlier owing to the current taxation policy.

According to industry estimates, crypto trading on Indian exchanges had slumped by up to 80% within the first 10 days of the implementation of crypto tax.

Commenting on the survey findings, Rajagopal Menon, vice president, WazirX, said, “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 report further indicated that the worst impacted were millennials compared with their senior counterparts.

Around 28% of the respondents aged 18 and 35 years have sold more than 50% of their holdings before 1 April. Further, 23% wished to move their holdings to an international exchange to avail a more favourable tax climate.

This emigration poses a significant risk in terms of investors falling prey to non-KYC compliant international exchanges.

However, the report said that the holders continued to retain their positions, with 45% saying they would hold on to their positions.

Avinash Shekhar, chief executive officer of ZebPay, said, “The results indicate a considerable number of respondents intend to reduce their trade frequency and participation in the category. 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.”