India began the new year by presenting its Union Budget for the financial year 2025-26 on 1 February 2025. While some sectors have found reasons to celebrate, leaders in the crypto industry are expressing disappointment over the government’s choice to keep the existing tax burdens on cryptocurrencies intact.
However, there’s a growing call for a more investor-friendly regulatory framework, influenced by global trends, including President Trump’s favorable crypto policies gaining traction.
Before the budget, the crypto sector anticipated reforms that would alleviate the heavy tax rates applied in previous years. Currently, there is a flat 30% tax on income from virtual digital assets (VDAs) and a 1% Tax Deducted at Source (TDS) on transactions over certain limits, introduced under The Finance Act of 2022.
Moreover, the government surprised stakeholders by prohibiting losses from VDAs from being offset against other income or gains from different VDAs. Industry optimism had surged regarding easing stringent compliance measures until now.
Crypto Industry Leaders in India Express Disappointment
Numerous comments from crypto entrepreneurs and investors have surfaced in media outlets, expressing discontent over the budget’s inability to offer tax relief or regulatory clarity.
Sathvik Vishwanath, Co-Founder and CEO of Unocoin, stated, “The Union Budget 2025 offers no respite for crypto investors, as taxation policies remain unchanged, maintaining the 30% tax on gains and 1% TDS on transactions. This continues to create liquidity issues, discouraging retail participation and innovation in the sector.”
Furthermore, increased compliance requirements have raised new concerns within the industry.
During the budget session, Finance Minister Nirmala Sitharaman suggested changes to the Income Tax Act that would require a designated reporting entity to disclose transaction details related to VDAs. Unreported crypto gains will be classified as undisclosed income, resulting in a tax rate of 60% on such earnings. A 50% penalty will be imposed if authorities identify these evaded taxes during assessments.
In addition, the proposed amendment involves ensuring that a designated reporting entity concerning crypto assets submits information about transactions per prescribed statements, aligning definitions around virtual digital assets.
Consultation Paper on India’s Crypto Regulations Sees Further Delays
In conjunction with the budget discussions, the reexamination of India’s crypto regulations via a consultation paper is ongoing. Initially expected to be published in March 2025, this much-anticipated paper seems to face further delays.
India’s Economic Affairs Secretary Ajay Seth remarked, “More than one or two jurisdictions have changed their stance toward cryptocurrency in terms of its usage and acceptance. In this stride, we are reviewing the discussion paper.”
Formerly, India aimed to establish its unique approach to creating a crypto framework, but the global adoption trends are demanding a shift in sentiment.
He added, “Since digital assets transcend borders, India’s stance cannot be isolationist.”
On a more practical front, despite progressive taxation, Indian investors continue to explore digital asset opportunities. Many utilize offshore exchanges via VPNs to navigate restrictions. Last year, India’s market oversight body advised that regulators need to oversee trading in cryptocurrencies as investors expressed readiness to adopt private digital assets.
The Reserve Bank of India (RBI), however, has consistently warned of the macroeconomic risks posed by private digital currencies. Sumit Gupta, CEO of CoinDCX, emphasized the importance of adopting crypto regulations, arguing that high taxes and unresolved policies harm Indian investors. He cautioned that the lack of a clear framework might drive innovation and talent away from India.
A staggering 90% of Indian investors are reportedly seeking offshore opportunities due to the high tax burdens, which translates to a loss of Rs 6 lakh crores in trading volume.
Gupta further expressed confidence that the new RBI governor recognizes modern technology and possesses insights into the crypto sector, suggesting that 2025 could be pivotal as many nations prepare essential regulations concerning digital assets.
