India Considers Slashing Crypto Transaction Tax From 1% to 0.1%

The Indian government is contemplating a substantial reduction in the crypto transaction tax, potentially lowering it from 1% to 0.1%, in response to growing pressure from the cryptocurrency industry. This consideration comes as exchanges and industry stakeholders intensify their lobbying efforts, seeking relief from the steep taxes imposed in 2022. The current tax regime includes a 30% capital gains tax and a 1% levy on every crypto transaction, which has been a significant burden for the industry.

The industry's demands are centered around a rollback of these taxes, which they argue have stifled domestic trading and hindered the growth of the sector. The cryptocurrency industry in India is urging the government to reconsider its tax policies, hoping to capitalize on what they see as a favorable regulatory environment in New Delhi. The industry believes that reducing the tax burden will encourage greater adoption of cryptocurrencies and foster a more vibrant ecosystem.

The potential reduction in the crypto transaction tax is seen as a positive development for the industry, which has been advocating for more favorable tax policies. The 1% tax on transactions has been particularly contentious, as it adds a significant cost to every trade, making it less attractive for investors and traders. By reducing this tax to 0.1%, the government could make crypto transactions more cost-effective, potentially boosting trading volumes and attracting more participants to the market.

The industry's lobbying efforts have gained momentum, with exchanges and other stakeholders actively engaging with policymakers to push for tax relief. The sector is hopeful that the government will respond positively to their demands, recognizing the potential benefits of a more supportive regulatory framework for the cryptocurrency industry. The outcome of these discussions could have significant implications for the future of crypto in India, shaping the regulatory landscape and influencing the sector's growth trajectory.

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Industry leaders are now meeting with policymakers every few weeks, a significant increase from the previous twice-a-year conversations. One of the top demands from these meetings is tax relief. Exchanges like CoinSwitch argue that the current tax regime is driving users to offshore platforms. Ashish Singhal of CoinSwitch suggests that a smaller 0.1% tax could still help the government track transactions without deterring traders. A study by the Esya Centre supports this, indicating that over 90% of Indian crypto trading has already moved abroad due to the current tax regime.

Tom Duff Gordon from Coinbase noted that India seems to realize that banning crypto isn’t realistic anymore, and that bringing activity onshore through better rules could actually grow the tax base. This sentiment is echoed by other industry stakeholders, who believe that a more supportive regulatory environment could attract global players and foster innovation in the sector.

Despite the RBI's softening tone, there are still doubts about the future of crypto regulation in India. Many believe that crypto is illegal in India, but younger investors are leading the shift towards greater acceptance. With global support for cryptocurrencies rising, India may not want to be left behind in this rapidly evolving sector. The government's updated crypto policy paper is eagerly awaited, as it could provide clearer guidelines and regulations for the industry.