With the Union Budget scheduled for early February, industry leaders say this may be the last realistic window to recalibrate taxes without passing new legislation.
Key Takeaways
- •India’s crypto tax rules are widely seen as misaligned with today’s global market structure.
- •A 30% flat tax and 1% transaction-level levy are blamed for draining onshore liquidity.
- •Exchanges argue compliance standards have risen, but tax policy has not evolved.
- •The February Union Budget is viewed as a critical opportunity for adjustment.
India’s existing framework, introduced in 2022, imposes a flat 30% tax on crypto gains alongside a 1% tax deducted at source on most transactions, regardless of profitability. Losses cannot be used to offset gains, a provision exchanges say is particularly punitive in volatile markets. While the rules were originally framed as a deterrent during a period of regulatory uncertainty, industry executives argue that the environment has since changed.
According to domestic platforms, India has significantly tightened supervision, improved enforcement and aligned crypto businesses with Anti-Money Laundering and Know Your Customer standards. Yet, they say tax friction remains frozen in an earlier phase, discouraging legitimate trading and pushing users toward offshore or informal alternatives.
Industry Seeks Tax Relief as Compliance Tightens
Executives from leading exchanges say the pressure on compliant platforms risks undermining regulators’ own objectives. WazirX founder Nischal Shetty argued that India now has an opportunity to fine-tune its approach, balancing enforcement with growth rather than defaulting to deterrence.
He pointed to the maturation of Web3 globally, including deeper institutional participation and more nuanced regulatory models, as evidence that India’s tax rules should be reassessed. In his view, lowering transaction-level taxes and allowing limited loss offsets could help bring liquidity back onshore while improving tax compliance.
Similar views were echoed by ZebPay chief operating officer Raj Karkara, who described the upcoming budget as a turning point. He said even modest adjustments to the 1% transaction tax could materially improve market depth and restore participation on Indian platforms, while a review of the headline tax rate would provide investors with greater predictability.
From a global exchange perspective, Binance APAC head SB Seker said the budget offers a chance to move away from what he described as a “tax-and-deter” model. He argued that focusing taxation on realized gains, paired with limited loss offsets and the removal of per-transaction levies, would be fairer to users and better aligned with India’s growing retail participation.
Enforcement Intensifies Amidst Reform Push
The push for reform comes as enforcement intensifies. India’s Financial Intelligence Unit recently introduced stricter verification rules for exchanges, including live selfie checks, geolocation tracking and enhanced identity verification.
Meanwhile, officials from the Income Tax Department have continued to warn lawmakers that offshore exchanges, private wallets and decentralized finance tools complicate efforts to track taxable income.
For the industry, the contradiction is becoming harder to ignore: compliance obligations are rising, but tax policy remains rigid. Exchange operators argue that unless taxes are recalibrated to reflect current market realities, India risks losing users, liquidity and innovation at the very moment it has built the regulatory tools to oversee them effectively.