India Signals Possible U-Turn on Harsh Crypto Tax Policy

India may be preparing to reverse its tough stance on cryptocurrency taxation. The government is now reportedly considering changes to the steep 30% tax on crypto gains and the 1% tax deducted at source (TDS) on every transaction. This comes after industry-wide lobbying and renewed discussions between officials and crypto firms.

A Policy That Crushed Local Markets

The 2022 tax regime sent shockwaves through India’s crypto space. Since its implementation, trading volumes on Indian platforms have plunged by nearly 90%. The 1% TDS, applied to every trade, made active trading nearly impossible, draining liquidity and pushing users to global platforms outside the country.

Many Indian crypto investors and companies relocated to more welcoming jurisdictions like Dubai and Singapore. Exchanges such as Binance and Coinbase scaled back operations in India following the policy change.

Warming Attitudes in New Delhi

Recent reports suggest that the Indian government is finally reconsidering its approach. Conversations between regulators and crypto leaders have become more frequent, moving from semiannual to biweekly meetings.

Coinswitch founder Ashish Singhal confirmed this shift. “Regulators are more closely talking to us and understanding what the space is,” he said.

Industry representatives are now pushing for a lower TDS rate of 0.1%, which they say would allow for transaction tracking without throttling market activity.

Global Politics and Domestic Pressure

This change in tone may also be influenced by global trends. U.S. President Donald Trump’s vocal support of cryptocurrency has reportedly helped legitimize the sector internationally, prompting Indian policymakers to reconsider their position.

The move aligns with India’s broader ambitions in fintech and digital infrastructure. With the domestic crypto market expected to reach $15 billion by 2025—up from $2.2 billion last year—there’s growing pressure to avoid another missed opportunity.

Past Failures, Renewed Urgency

India’s regulatory vacuum has long frustrated the crypto industry. Since 2017, the government has promised a comprehensive framework multiple times, yet has not released a single draft bill.

The 2022 WazirX hack, which resulted in over $230 million in losses, exposed serious flaws in consumer protection and accountability. Victims struggled to get a response from regulators, highlighting the urgent need for clear policy.

Signs of a Reopening Market

There are also signs that India is reopening its doors to foreign crypto businesses. Binance and Coinbase, both of which had previously withdrawn, have recently received approvals to re-enter the Indian market.

As global sentiment toward crypto improves, Indian regulators seem to be catching up. While no official changes have been announced, the frequency of dialogue and openness to new proposals suggest that a major shift could be on the horizon.

Looking Ahead

A revised tax structure could breathe new life into India’s crypto industry. Lower TDS and a more reasonable capital gains tax would restore market efficiency and potentially bring back users and companies that left the country.

For now, the industry remains cautiously optimistic. The next few months will be critical as the government weighs its options—and decides whether India will once again embrace the future of digital assets.