India's Crypto Industry Seeks Reform Amid 30% Tax, 1% TDS

India's regulatory stance on cryptocurrency has intensified, with high taxes, tax deducted at source (TDS), and mass notices to traders driving the industry to demand policy reform. The government imposes a 30% tax on crypto gains, prohibits offsetting losses, and enforces a 1% TDS on every crypto transaction. This has left the sector in a state of uncertainty, as the government has not outright banned digital assets but has implemented strict regulations.

The crypto industry in India is divided on the issue. While some, like Raj Kapoor, CEO of the India Blockchain Alliance, believe that strict rules are better than ambiguity, many crypto players argue for reform. Local exchanges are pushing for a reduction in TDS from 1% to 0.01% and allowing losses to be offset against gains. However, rising concerns about tax evasion and cybercrime have made authorities hesitant to embrace more liberal crypto policies.

The Indian Income Tax Department has issued notices to thousands of individuals who traded digital assets but failed to report them in the FY 2022–23 and 2023–24 tax filings. Authorities suspect that some traders used crypto as a tool for tax evasion, exploiting the lack of detailed reporting standards during the early days of regulation. Crypto traders must now correct their filings using the updated return option. CoinDCX Co-founder Sumit Gupta has advised all users to report crypto income, including earnings from airdrops or global exchanges, and emphasized the need to stay compliant.

India’s current crypto tax policy includes a 30% capital gains tax on digital assets, no loss offset allowed, and a 1% TDS on transactions exceeding Rs. 10,000. These tough regulations have led to top global exchanges like OKX exiting the Indian market. Even homegrown platforms feel the pressure, urging policymakers to reconsider the TDS rate and revise the tax structure to promote growth and investment.

India’s reluctance to ease crypto regulations is also driven by the rise in crypto-linked cybercrimes. Recently, the Central Bureau of Investigation (CBI) arrested Rahul Arora, seizing over $327,000 in crypto tied to scams in the U.S. and Canada. In February, the GainBitcoin scam led to raids on 60 locations and the seizure of $2.9 million in digital assets — a case involving over $800 million in fraud. The CBI has now built in-house systems to track and seize crypto, signaling the government’s focus on creating a safer crypto environment before relaxing policies.

In summary, India is not against cryptocurrency but is cautious in its approach. With tax notices being sent, foreign platforms exiting, and cybercrimes increasing, the focus remains on compliance and safety rather than rapid liberalization. Until India establishes a robust regulatory framework, a truly crypto-friendly economy might remain out of reach.