India's Tax Authority Considers Overhaul of Crypto Regulations Amid Industry Push for Reform

India’s Central Board of Direct Taxes (CBDT) has initiated a consultation process with domestic cryptocurrency platforms to assess the need for a new legal framework for digital assets. The move comes amid growing concerns over regulatory ambiguity surrounding derivatives and cross-border transactions in the crypto space. The tax authority has also questioned the impact of the existing 1% tax-deducted-at-source (TDS) on every crypto transaction and the 30% flat tax on capital gains, both of which have been criticized as potentially stifling growth in the sector [1].

According to a report by The Economic Times, the CBDT has requested responses from crypto platforms by mid-August, indicating a structured approach to shaping the future of crypto taxation and regulation in the country [2]. The agency’s inquiries include how current tax policies affect trading volumes and liquidity, and whether the tax structure creates an uneven playing field between domestic and offshore exchanges [3]. This has become a pressing issue as local exchanges begin to offer derivative products like crypto futures, with some providing leverage of up to 100x on certain pairs [4].

The development has been welcomed by industry players who argue that India’s crypto community is struggling under the weight of stringent taxation. Industry representatives are pushing for reforms that include reducing the capital gains tax and revisiting the 1% TDS on transactions [5]. The sector has also been actively lobbying the government to establish a more favorable regulatory environment, aligning with global trends that increasingly favor structured regulation over outright bans [6].

Purushottam Anand, founder of Crypto Legal, has expressed optimism that India is on the path to introducing a comprehensive virtual digital asset regulation. He cited the government’s G20 Synthesis Paper and the upcoming detailed examination of crypto by the Parliamentary Standing Committee on Finance as signs of progress [7]. However, he also acknowledged the challenges posed by the Reserve Bank of India’s historically negative stance on cryptocurrency, which has cast uncertainty over the pace of reform [8].

Industry leaders such as Sumit Gupta, CEO of CoinDCX, and Ashish Singhal, co-founder of CoinSwitch, have also commented on the evolving landscape. Gupta emphasized India’s growing role in the global crypto dialogue, particularly during its G20 presidency, and highlighted the need for a “clear, long-term roadmap” to support innovation while ensuring consumer protection [9]. Singhal noted a recent shift in the RBI’s tone, describing the relationship as moving from negative to neutral, though he stopped short of calling it positive [10].

The global crypto market, particularly in the US with recent ETF inflows, has further prompted India to reconsider its approach to digital assets. As advanced jurisdictions introduce pro-crypto laws, India’s potential shift from skepticism to engagement could position it as a key player in the global crypto ecosystem [11].

Source: [1] Does India Need a New Crypto Law? Tax Authority Questions Local Players (https://cryptonews.com/news/does-india-need-a-new-crypto-law-tax-authority-questions/)

[2] Ibid

[3] Ibid

[4] Ibid

[5] Ibid

[6] Ibid

[7] Ibid

[8] Ibid

[9] Ibid

[10] Ibid

[11] Ibid