India’s Crypto Industry Pushes for Tax Relief
Key Takeaways
India’s crypto industry is calling for significant tax relief. The goal is to revive a market that has declined due to strict regulations. The focus is on reducing the capital gains tax on crypto profits and adjusting the transaction tax. Initial discussions with the government are underway, while international providers are already preparing for a return.
Background: Tax Burden Slows Down India’s Crypto Market
Since 2022, India has implemented a strict tax regime for cryptocurrencies. Profits from crypto transactions are taxed at 30%. In addition, a 1% withholding tax (TDS – Tax Deducted at Source) is applied to every transaction. These measures were originally intended to combat money laundering and improve traceability. In practice, however, they have led to a significant drop in trading volume.
Market Decline and Exodus of International Providers
The consequences of the regulations have been severe: trading volume on Indian crypto exchanges has dropped by around 90%. Major international platforms such as Coinbase, Binance, and Bybit have withdrawn. The Financial Intelligence Unit (FIU), India’s financial regulator, also imposed fines on several providers for violating anti-money laundering regulations.
Return of International Exchanges Planned
After paying fines, Binance, KuCoin, and Coinbase have received licenses to restart operations in India. This could bring fresh competition back into the market. The industry hopes that a tax reform will pave the way for sustainable growth.
Industry Talks: 0.1% TDS as a Compromise Proposal
Ashish Singhal, co-founder of Indian crypto exchange CoinSwitch, proposes reducing TDS to 0.1%. According to him, this would still ensure traceability without hindering trading. He emphasizes that talks with policymakers are increasing and are more constructive than in the past.
Political Tailwinds from Global Developments
Singhal also points to international momentum. The pro-crypto stance of U.S. President Donald Trump has created new dynamics globally. This development is also influencing Indian politics, which is now showing a more open attitude toward the industry.
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Market Potential: USD 15 Billion by 2035
Consulting firm Grant Thornton forecasts that India’s crypto market could grow to USD 15 billion by 2035. This would represent a fivefold increase compared to 2024. However, this growth depends on stable regulatory conditions.
Regulatory Resistance Remains
Despite positive signals, the stance of the Reserve Bank of India remains critical. It warns of risks to the country’s financial stability. A fundamental liberalization of the market is therefore likely to continue facing resistance.
Our Assessment
India’s crypto industry is at a turning point. The current tax regulations have significantly weakened the market. A moderate adjustment, as proposed by industry representatives, could revive trading and bring back international providers. Whether the government will commit to reform depends on political will and the international climate. For investors and providers, the situation remains uncertain for now, but the signs point to change.
Sources
- Financial Times
- Grant Thornton
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