The Union Budget 2025, announced on February 1, did not include any updates or reductions in virtual digital asset (VDA) taxes, disappointing the crypto industry, which has seen trading volumes plunge by over 80–90 percent since the taxes were introduced in 2022.
At present, taxes on VDAs include a 30 percent tax on income from crypto and other digital assets and 1 percent tax deducted at source (TDS) on every crypto transaction of Rs 10,000 in India.
The only change for the crypto sector in Budget 2025 was an amendment in the Income Tax Act, requiring the reporting entities including exchanges, to disclose transaction information of crypto assets.
"India has been included in the list of 52 "Relevant" jurisdictions for the purpose of Crypto Asset Reporting Framework (CARF). CARF provides for the automatic exchange of tax-relevant information (AEOI) on Crypto-Assets. The G20 Leader’s New Delhi Declaration called for the swift implementation of the CARF. To enable this an amendment is being brought for the prescribed Reporting Entities to furnish information of crypto-asset," an FAQ document on the income tax changes said.
Ashish Singhal, Co-founder of crypto investment platform CoinSwitch, said, "We were hopeful that the government would take steps to rationalise the tax structure on VDAs, but unfortunately, that has not materialised. However, the inclusion of VDA governance in the Finance Bill is a positive step, bringing in more regulatory clarity, reflecting the growing adoption of digital assets and acknowledging the impact they are making on the economy."
High tax burden
The industry was hoping for a reduction in VDA taxes and bringing down the TDS rate to 0.01 percent.
"India leads in grassroots crypto adoption, yet the high tax burden has driven many participants to offshore exchanges, reducing transparency and limiting domestic market growth. A more balanced approach—such as lowering TDS to 0.01 percent and allowing loss offsets—could have encouraged sustainable participation and innovation," said Edul Patel, CEO and Co-founder of Mudrex.
As digital assets and regulations continue to evolve globally, it is crucial for India to strike the right balance between regulation and growth, he added.
Bringing down taxes could have attracted more retail and institutional participation in crypto trading in India amidst an ongoing bull run in the sector post Donald Trump’s US election victory.
The sentiments of retail investors are also down since the $230-million hack at the country’s largest crypto exchange WazirX, which lost nearly 45 percent of its crypto holdings in July 2024.
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