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- India’s crypto sector is urging tax changes ahead of the February Union Budget.
- Exchanges say high taxes undermine liquidity despite stronger compliance.
- Policymakers face pressure to balance enforcement with innovation.
India’s crypto sector is stepping up calls for tax reform as the government prepares its Union Budget, arguing that the current framework is stifling domestic participation just as regulatory oversight becomes more stringent.
Introduced in 2022, India’s crypto tax regime imposes a flat 30% tax on digital asset gains alongside a 1% tax deducted at source (TDS) on most transactions, regardless of profitability. Traders are also barred from offsetting losses against gains. Industry leaders say this structure no longer reflects how crypto markets operate—or India’s own progress in building compliance systems.
With the Union Budget expected on Feb. 1, exchanges view the fiscal process as a rare opportunity to recalibrate crypto taxation without passing new legislation.
Exchanges Say Compliance Has Improved, But Tax Friction Remains
Executives from leading Indian platforms argue that while exchanges have invested heavily in compliance, tax policy has not evolved alongside enforcement.
Nischal Shetty, founder of WazirX, said India is now better positioned to strike a balance between oversight and innovation. He noted that global crypto markets have matured, with stronger institutional participation and clearer regulatory frameworks emerging in several jurisdictions.
According to Shetty, reducing transaction-level taxes and revisiting loss offset restrictions could help restore onshore liquidity and keep economic activity within India’s regulated ecosystem.
Budget Seen as a Turning Point for Onshore Liquidity
ZebPay COO Raj Karkara described the upcoming budget as a “pivotal moment” for the industry. He argued that the 1% TDS has had an outsized impact on trading volumes by draining liquidity at every transaction step.
Karkara also said reviewing the flat 30% tax on gains could bring greater predictability for investors and align crypto taxation more closely with other asset classes.
Binance APAC head SB Seker echoed similar views, calling for a shift toward taxing realized capital gains rather than penalizing transaction activity. He said a more pragmatic approach would improve fairness for retail users and signal a move away from what many see as a deterrent-first policy.
Reform Calls Come as Enforcement Tightens
The renewed push for tax reform comes amid tougher compliance requirements. India’s Financial Intelligence Unit recently rolled out new KYC rules, mandating live selfie verification, geolocation and IP tracking, bank account checks, and additional identity documentation.
At the same time, tax authorities continue to warn lawmakers that offshore exchanges, private wallets, and decentralized platforms complicate efforts to track taxable income.
Industry leaders argue that pushing compliant platforms harder—while leaving structural tax issues unresolved—risks driving users offshore, ultimately undermining enforcement goals.
As India finalizes its fiscal priorities, the crypto industry is urging policymakers to recognize that compliance and innovation are no longer at odds. With stricter oversight already in place, exchanges say targeted tax reforms could strengthen transparency, retain capital onshore, and position India as a serious player in the global digital asset economy.
India’s crypto sector is stepping up calls for tax reform as the government prepares its Union Budget, arguing that the current framework is stifling domestic participation just as regulatory oversight becomes more stringent.
Introduced in 2022, India’s crypto tax regime imposes a flat 30% tax on digital asset gains alongside a 1% tax deducted at source (TDS) on most transactions, regardless of profitability. Traders are also barred from offsetting losses against gains. Industry leaders say this structure no longer reflects how crypto markets operate—or India’s own progress in building compliance systems.
With the Union Budget expected on Feb. 1, exchanges view the fiscal process as a rare opportunity to recalibrate crypto taxation without passing new legislation.
Executives from leading Indian platforms argue that while exchanges have invested heavily in compliance, tax policy has not evolved alongside enforcement.
Nischal Shetty, founder of WazirX, said India is now better positioned to strike a balance between oversight and innovation. He noted that global crypto markets have matured, with stronger institutional participation and clearer regulatory frameworks emerging in several jurisdictions.
According to Shetty, reducing transaction-level taxes and revisiting loss offset restrictions could help restore onshore liquidity and keep economic activity within India’s regulated ecosystem.
ZebPay COO Raj Karkara described the upcoming budget as a “pivotal moment” for the industry. He argued that the 1% TDS has had an outsized impact on trading volumes by draining liquidity at every transaction step.
Karkara also said reviewing the flat 30% tax on gains could bring greater predictability for investors and align crypto taxation more closely with other asset classes.
Binance APAC head SB Seker echoed similar views, calling for a shift toward taxing realized capital gains rather than penalizing transaction activity. He said a more pragmatic approach would improve fairness for retail users and signal a move away from what many see as a deterrent-first policy.
The renewed push for tax reform comes amid tougher compliance requirements. India’s Financial Intelligence Unit recently rolled out new KYC rules, mandating live selfie verification, geolocation and IP tracking, bank account checks, and additional identity documentation.
At the same time, tax authorities continue to warn lawmakers that offshore exchanges, private wallets, and decentralized platforms complicate efforts to track taxable income.
Also Read: India to Launch Rupee-Backed ARC Stablecoin in Q1 2026 — A Game-Changer for Payments
Industry leaders argue that pushing compliant platforms harder—while leaving structural tax issues unresolved—risks driving users offshore, ultimately undermining enforcement goals.
As India finalizes its fiscal priorities, the crypto industry is urging policymakers to recognize that compliance and innovation are no longer at odds. With stricter oversight already in place, exchanges say targeted tax reforms could strengthen transparency, retain capital onshore, and position India as a serious player in the global digital asset economy.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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