Urgent Tax Revisions Demanded by Cryptocurrency Platforms
Cryptocurrency platforms operating in India are demanding substantial tax policy revisions ahead of the government's February budget presentation. Exchange executives argue that existing frameworks create unnecessary friction for compliant domestic operators while tightening regulatory requirements continue to reshape the sector.
Current Tax Structure and Its Impact
The country's 2022 tax structure imposes a 30% flat rate on all cryptocurrency gains alongside a 1% deduction at source applied to transaction values regardless of profitability. Traders currently cannot offset losses against gains, creating what industry participants describe as punitive conditions that discourage legitimate market activity.
Calls for Modernization and Global Alignment
WazirX founder Nischal Shetty stated that policymakers have opportunities to modernize cryptocurrency oversight in ways that support both innovation and regulatory compliance. Shetty argued that global Web3 maturation over recent years, including growing institutional participation and evolving international regulations, justifies reassessing India's current approach.
Reducing transaction-level deductions and permitting limited loss offsetting could restore liquidity to domestic platforms while improving overall compliance rates, according to Shetty's recommendations. These modifications would help retain economic activity within India's regulatory perimeter rather than pushing users toward offshore platforms beyond governmental oversight.
Key Stakeholders Advocate for Rationalization
ZebPay chief operating officer Raj Karkara characterized the upcoming budget cycle as a critical moment for India's digital asset ecosystem. He suggested that rationalizing the 1% transaction tax would meaningfully boost liquidity and encourage stronger domestic participation, while reviewing the flat gains tax would provide investors with more predictable operating environments.
Binance's Asia-Pacific leadership echoed similar reform priorities, with regional head SB Seker advocating for frameworks focused on realized capital gains rather than transaction-level levies. Seker described current policies as reflecting a tax-and-deter philosophy that discourages rather than channels cryptocurrency activity into regulated, compliant channels.
Intensifying Compliance Requirements
Compliance requirements facing Indian platforms have intensified substantially alongside ongoing tax debates. The Financial Intelligence Unit implemented new customer verification protocols this week, requiring live selfie authentication, geolocation tracking, IP address monitoring, bank account validation, and supplementary government identification beyond existing Know Your Customer standards.
Challenges in Monitoring Offshore and Decentralized Platforms
Tax enforcement officials separately warned lawmakers that offshore exchanges, self-custody wallets, and DeFi protocols significantly complicate efforts to monitor taxable cryptocurrency income. These concerns underscore the challenge facing regulators attempting to balance revenue collection with supporting domestic industry development and preventing capital flight to jurisdictions with more favorable policies.