India’s ongoing debate over crypto taxation persists as industry and observers push for reforms to reduce transaction friction and retain domestic activity amid unchanged tax policies.
India’s debate over crypto taxation has flared again after the Bharatiya Janata Party announced a reshuffle of its national office-bearers on August 17, but there is no indication that the government is preparing an immediate change to the tax treatment of virtual digital assets. The current system remains a 30% tax on VDA income, plus surcharge and cess, alongside a 1% tax deducted at source on qualifying transfers. Industry guides on India’s 2025-26 tax rules say those provisions still apply, with no loss set-off allowed and only the acquisition cost deductible.
The pressure for reform comes less from politics than from the mechanics of the tax itself. Because the 1% levy is applied to transaction value rather than profit, traders can see cash withheld even when gains are small or absent. A sale of ₹30 lakh worth of crypto, for example, can trigger ₹30,000 in TDS, creating a drag on working capital for active traders who recycle funds quickly. Guidance from several tax publications also notes that crypto holders must report these transactions in Schedule VDA of the income tax return, with errors potentially prompting tax notices.
That structure has fuelled complaints that India’s rules are unusually punitive compared with other parts of the investment market. Tax-focused explainers on the regime say investors cannot offset losses from one digital asset against gains from another, and they cannot claim most expenses beyond the original purchase price. Supporters of reform argue that such limits discourage legitimate trading and push activity abroad rather than into regulated domestic venues.
That concern is reinforced by data from the Esya Centre, which found that offshore platforms handled more than 90% of Indian VDA trading during its measured period, while Indians traded more than ₹3.5 lakh crore worth of virtual digital assets between July 2022 and October 2023. On that basis, the centre recommended cutting TDS to 0.01% or replacing it with a different reporting tool. The argument is that a lower friction cost could keep more liquidity inside India without abandoning transaction tracking altogether.
For now, though, any talk of a Modi-led tax reset remains speculative. The reshuffle announced on August 17 did not include a crypto tax proposal, and there has been no formal move from the finance ministry, the Central Board of Direct Taxes or Parliament to amend the framework. Until that changes, the 30% tax and 1% TDS remain the rule, and investors would be wise to treat hopes of an imminent cut with caution.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
