India reconsiders its strict tax policies on cryptocurrencies in the context of concerns concerning the drop in market activity and the offshore migration of cryptographic companies. The Central Council for Direct Taxes (CBDT), the main tax authority in the country, has launched consultations with industry stakeholders to reassess the impact of 30% stable tax on capital gains and 1% tax deduced to the source (TDS) on each transaction. These measures, introduced in 2022, aroused criticism of stifling liquidity and innovation, the negotiation volumes would have dropped from 90% to 95% in immediate consequences. In response, the CBDT has distributed a detailed questionnaire to crypto exchanges and service providers who seek to know if the current tax regime dissuades growth and if a new regulatory framework is necessary (1).
Participants in industry have raised fears that existing rules create a hostile environment for local merchants and exchanges. TDS of 1% per exchange is considered a significant burden, while the inability to deduce losses because of gains makes risk management difficult. In addition, the absence of a single regulatory body supervising cryptographic activities – whether it be India reserve banking (RBI), Securities and Exchange Board of India (SEBI) or the Ministry of Electronics and Information Technologies (Meity) – contributed to the regulatory ambiguity (3). Consequently, many companies have moved their operations abroad, where more favorable conditions prevail. The CBDT has also noted a change in commercial volume to offshore scholarships since the taxation of the 30%tax, which raises concerns concerning capital leakage and the loss of technological talents (1).
Beyond the comments of the industry, the CBDT has taken application measures to ensure compliance. More than 44,000 merchants have received opinions for having omitted to disclose the income from virtual digital assets (VDAS), as part of a broader repression. The NUDGE campaign, aimed at promoting voluntary conformity before punitive measures are taken, reflect government pressure to enforce tax discipline in cryptographic space. Over the past two years, India has collected around 705 crores of ₹ (approximately $ 83.5 million) in cryptographic taxes, while the audits have discovered an additional 630 incorporated unorganized income (3). The use of technology, including Project Insight and the Non-Filter Surveillance System (NMS), allowed the CBDT to follow transactions more effectively, improving transparency and reducing escape (3).
Meanwhile, the neighbors of India are growing with more structured approaches to cryptography regulations. Large economies such as China Hong Kong, Japan and South Korea have implemented or are writing stable frames, contrasting with the more prudent and fragmented position of India. In particular, the United States has adopted a proactive approach with the Act on Engineering, which aims to formalize the stablecoins supported in dollars and to strengthen the domination of the US dollar in the global economy of cryptography (2). The current tax model of India, considered to be among the most punitive in the world, risks further marginalizing the country of global trends and innovation (2).
Representatives of the cryptographic industry argue for reforms that would put the sector in accordance with international practices. Key proposals include reducing the rate of TDS between 0.1% and 0.5%, allowing the loss of losses and establishing a clear legal definition of VDA. A unified regulatory body would also help rationalize surveillance and reduce charges of compliance. Without these changes, industry warns that India may lose the potential of the cryptographic ecosystem, many companies choosing to operate from more user -friendly Crypto jurisdictions (3).
Source:
(1) Crypto tax hard from India during examination: the CBDT considers the reset of major policies (https://www.ifcreview.com/news/2025/august/india-india-sharsh-crypto-lox–render-review-cbdt-considers-major-reset/)
(2) Stablecoins in Japan and China, India Mulls Crypto Tax (https://cointelegraph.com/magazine/japan-china-stablecoins-india-crypto-tax-asia-express/)
(3) CBDT proposals for the regulation of cryptography in India (
