India's Crypto Future: A Shift in Policy, Stricter Taxes Loom

India's crypto future remains uncertain as the government rethinks its regulatory approach, signaling a potential shift in policy. Economic Affairs Secretary Ajay Seth acknowledged that several jurisdictions have adjusted their stance on crypto, prompting India to revisit its regulatory approach. This move suggests a willingness to explore more adaptive policies that could allow the sector to thrive.

However, even as the government considers a broader crypto stance, India's Budget 2025 introduces stricter tax measures on digital assets. Cryptocurrencies are now classified as virtual digital assets and subjected to higher tax rates if they aren't disclosed as income. Effective February 2025, the revised tax policy imposes a 70% penalty on undeclared crypto gains and retroactively applies them to the past four years. By April 2026, businesses involved in crypto transactions must report all dealings to tax authorities, increasing the compliance requirements across the sector.

Industry experts warn that these rigid tax policies could drive crypto traders toward underground markets or offshore platforms, making regulatory oversight more challenging. Sumit Gupta, the CEO of Indian crypto exchange CoinDCX, criticized the tax framework, arguing that a 0.01% TDS rate and the ability to offset trading losses would have encouraged compliance while boosting government revenues. He cautioned that India risks falling behind in the rapidly evolving blockchain economy without a more balanced regulatory approach.

India's crypto regulatory landscape remains in flux, with the government weighing the potential benefits and risks of embracing digital assets. As the global crypto market continues to evolve, India must navigate the complex terrain of regulation, taxation, and innovation to secure its place in the burgeoning blockchain economy.