India Reconsiders Crypto Policy Amid Stricter Tax Regulations
By: Isha Das
India's government is reportedly reevaluating its current stance on cryptocurrencies, indicating a possible policy shift as other global economic powers demonstrate a more favorable outlook on digital assets. According to a Reuters report, this revision process aligns with recent developments in countries like the United States, where pro-crypto policies are gathering momentum. This shift is fueling predictions of an increase in the adoption of financial products tied to digital currencies, potentially transforming how these assets are regulated worldwide.
Ajay Seth, India's Economic Affairs Secretary, acknowledged that various international jurisdictions have amended their policies on cryptocurrencies. He explained that this has encouraged India to revisit its regulatory framework, potentially opening doors for the sector to flourish under adaptive policies. Leaders in the industry, such as CoinDCX co-founder Sumit Gupta, view this move as a progressive step. He noted, "To lead this digital revolution, regulating the sector, friendlier policies, and releasing a discussion paper on priority is the need of the hour!" Gupta emphasized that India is at the forefront of grassroots crypto adoption, with estimates suggesting that Web3 could contribute significantly to the country's GDP over the coming decade.
Despite these policy discussions, India's 2025 Budget introduces more rigorous tax measures on digital assets. As per the new budgetary details, cryptocurrencies fall under the category of virtual digital assets and are subject to higher tax rates if not disclosed as income. Effective from February 2025, any undeclared crypto gains will incur a 70% penalty, with retroactive applicability for the past four years. Furthermore, by April 2026, companies dealing in crypto transactions must report all activities to tax authorities, increasing the compliance load on the sector. These guidelines mandate detailed transparency regarding transaction participants, asset types, and trade values.
Industry experts caution that these stringent tax policies might drive crypto traders to underground markets or offshore platforms, thereby complicating regulatory oversight. Sumit Gupta criticized the current tax regime, suggesting that a lower TDS rate and allowances for offsetting losses would promote compliance while enhancing state revenue. Echoing a similar sentiment, CoinSwitch's co-founder remarked that despite the softened stance on regulations, the trading environment continues to be costly in India due to the high tax burden. As India aims to become a $30 trillion economy by 2047, embracing technologies like AI, Web3, and blockchain remains crucial. Industry leaders warn that unless India enacts policies fostering innovation rather than stifling it, it may lag in the blockchain economy.
