India Considers Crypto Tax Cut Amid Policy Shift

In what could be a landmark moment for India’s embattled cryptocurrency sector, policymakers are reportedly considering significant tax reforms that may reverse the country’s stringent digital asset taxation regime. The Indian government’s shift in tone follows increasing global adoption of cryptocurrencies, growing internal industry pressure, and geopolitical developments—most notably, U.S. President Donald Trump’s pro-crypto stance, which has energized crypto markets worldwide.

This potential reversal comes at a crucial time, as India’s once-vibrant crypto industry struggles to recover from a two-year policy-induced downturn that triggered the exit of capital, talent, and startups to friendlier jurisdictions.

Background: India’s Tough Tax Policy and Its Fallout

India introduced one of the world’s harshest crypto tax regimes in 2022, imposing:

A 30% flat tax on all crypto gains (with no offset for losses)
A 1% Tax Deducted at Source (TDS) on every crypto transaction

The immediate impact was disastrous. Daily trading volumes plummeted by over 90%, exchanges shut down domestic operations or relocated abroad, and India’s position in global crypto innovation sharply declined. A once-thriving digital asset industry—with a user base of over 20 million—saw its potential crippled by overregulation.

Indian traders migrated to crypto-friendly locations like Dubai, Singapore, and the UK, leading to a massive outflow of capital and brainpower. The tax burden also led to lower liquidity, higher slippage, and wider bid-ask spreads, all of which hindered market efficiency.

The Turning Point: Policy Conversations Resume

According to multiple industry insiders and reports from the Financial Times, the Indian government is re-engaging with crypto stakeholders. What was once a semi-annual policy dialogue has turned into a biweekly consultation rhythm, suggesting a newfound seriousness in tackling crypto regulation.

Ashish Singhal, founder of crypto exchange CoinSwitch, confirmed this shift:

“Regulators are more closely talking to us and understanding what the space is.”

This uptick in interaction marks a major departure from the previous stance, where most government departments either ignored crypto firms or treated them with overt suspicion.

Trump’s Pro-Crypto Agenda and Its Influence

Interestingly, part of India’s changing attitude is being attributed to geopolitical shifts, particularly the Trump administration’s renewed support for crypto. President Trump’s vocal endorsement of digital assets, along with his recent policy proposals to encourage crypto adoption in the U.S., is reportedly influencing regulators in emerging economies, including India.

The message is clear: crypto is gaining mainstream legitimacy, and nations that remain hostile to it may risk losing out on future financial innovation.

Trump Media’s recent announcement of a $3 billion crypto investment plan has further highlighted how political leadership can shape regulatory perspectives. As major economies like the U.S. move to embrace digital assets, India appears to be re-evaluating its isolationist stance.

Proposed Reforms: What the Industry Wants

The crypto industry in India has been actively lobbying for a reduction in TDS from 1% to 0.1%—a change that would:

Allow for better liquidity on Indian exchanges
Encourage compliance and ease tracking of trades
Make the Indian market more competitive globally

Industry leaders argue that a 0.1% TDS would still allow the government to track transactions effectively while not stifling trading activity.

There is also demand for:

A lower capital gains tax rate
Offsetting of losses against gains
Clear classification of digital assets (utility vs. securities)
A well-defined consumer protection and AML/KYC framework

The Stakes: India’s $15 Billion Crypto Market

India’s digital asset market is projected to reach $15 billion in value by 2025, up from $2.2 billion in 2023, according to industry estimates. Yet, this growth remains largely untapped due to unclear and punitive regulations.

India has one of the world’s youngest, most tech-savvy populations, making it a natural leader in digital financial services. However, without regulatory clarity, much of this potential remains dormant or diverted to other countries.

Lessons from the WazirX Hack: A Wake-Up Call

In 2022, Indian exchange WazirX suffered a devastating $230 million hack, exposing systemic weaknesses in the country’s crypto ecosystem. Victims were left scrambling as authorities remained largely unresponsive. The lack of a formal investor protection mechanism, response protocols, and insurance coverage sparked outrage and forced the conversation back onto regulatory negligence.

The incident highlighted an urgent need for:

Exchange licensing standards
Mandatory reserve disclosures
Disaster recovery protocols
Legal recourse mechanisms for affected users

It also served as a pivotal moment in catalyzing public demand for better regulation, not prohibition.

Global Exchanges Re-Entering Indian Market

Encouraged by renewed regulatory discussions, foreign crypto exchanges that once exited India—such as Binance and Coinbase—are now re-establishing partnerships and preparing for re-entry.

Some have sought clarity on taxation and KYC norms, while others are building localized versions of their platforms to comply with future laws.

Their return signals confidence in India’s changing regulatory environment and growing optimism about a pro-crypto pivot.

Government’s Balancing Act: Innovation vs. Risk

India’s hesitation to embrace crypto has often been rooted in legitimate concerns:

Use of crypto in money laundering and fraud
Challenges in tracking cross-border transfers
Risk of currency destabilization
Weak consumer protection laws in the digital domain

However, complete restriction has proven ineffective and counterproductive. Now, as other nations balance risk mitigation with innovation, India appears to be preparing for a middle-ground approach.

The upcoming regulatory framework is expected to be technology-neutral, risk-based, and inclusive of both centralized and decentralized platforms.

What Comes Next: Outlook for 2025 and Beyond

Key indicators to watch for in the coming months include:

The Union Budget 2025, which may include crypto tax revisions
A potential draft bill outlining a regulatory framework for digital assets
Updated guidelines from the Reserve Bank of India (RBI) and the Ministry of Finance
Clearer roles for SEBI (Securities and Exchange Board of India) and other regulators in overseeing the crypto space

Industry insiders are cautiously optimistic. If the tax structure is revised and a proper regulatory framework is introduced, India could become:

A crypto innovation hub in Asia
A preferred base for Web3 startups
A leader in decentralized finance (DeFi) adoption

Final Thoughts: Don’t Miss the Moment

India’s $15 billion crypto market is at a crossroads. The chance to revive it is real, but fleeting. By reversing its punitive tax policies and embracing a balanced regulatory model, India can: