India taxes crypto at 30% capital gains and 1% TDS, pushing over 90% of trading offshore.
RBI has softened its stance, shifting from opposition to a cautious, neutral position.
Industry urges tax cuts to 0.1% TDS to encourage domestic growth and increase government revenue.
India’s cryptocurrency space is pushing the government to lower the current 30% capital gains tax and 1% tax deducted at source (TDS). This move aims to encourage more onshore trading and support the industry’s growth. The government and Reserve Bank of India (RBI) show signs of increased engagement and a softer approach, but regulatory delays and public confusion persist.
Increased Industry-Government Dialogue
According to a report by the Financial Times report, since 2022, India has taxed crypto gains at 30% and imposed 1% TDS on transactions. These measures intend to curb illegal activities and improve transparency. However, the taxes have pushed more than 90% of Indian crypto trading offshore, according to the Esya Centre in New Delhi.
Industry leaders report more frequent meetings with officials, shifting from biannual to nearly weekly discussions. Ashish Singhal, co-founder of CoinSwitch, noted this change in communication frequency. Executives propose lowering the TDS to 0.1% to maintain traceability while encouraging local activity.
Market Growth Prospects and Tax Impact
The current tax framework has raised concerns about limiting domestic investment and trading. The crypto market in India is forecasted to grow from $2.5 billion in 2024 to over $15 billion by 2035, according to Grant Thornton.
Major players like Coinbase and Binance have recently expanded operations in India, indicating renewed confidence in the market. Industry representatives argue that lower transaction taxes would prevent capital flight and foster sustainable growth within the country.
The RBI once held a firm stance against cryptocurrencies but has since adopted a more neutral position. In December, the central bank warned about risks to the financial system without opposing government efforts. It now avoids active resistance and prefers to observe developments. This shift suggests the RBI is moving cautiously while allowing regulatory frameworks to evolve.
Public Misunderstanding and Legal Uncertainty
Despite regulatory progress, confusion remains widespread among the public regarding the legality of cryptocurrencies. No official ban exists, but uncertainty lingers. The Supreme Court of India has criticized the government for delayed comprehensive regulations and urged clearer policy guidelines.
Earlier this year, Economic Affairs Secretary Ajay Seth announced plans to update key crypto policy papers. However, the February Union Budget did not offer any tax relief, leading to criticism from industry groups such as the Bharat Web3 Association.Coinbase’s international policy vice president identified a chance for the government to increase tax revenue by encouraging the repatriation of offshore crypto transactions. As India continues revising tax policies, stakeholders await clear regulations to integrate digital assets into the formal economy. The evolving dialogue between industry and regulators reflects ongoing efforts to balance oversight with market development.