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The Indian Parliamentary Standing Committee on Finance recently met with leading crypto exchanges such as Binance, WazirX, and ZebPay, as lawmakers continue to evaluate the future of Virtual Digital Assets (VDAs) in the country.
The discussion focused on crypto taxation, regulatory clarity, investor protection, and the increasing concern around capital outflows from India given the current tax regime on digital assets.
At the moment, India has a flat 30% tax on crypto gains, and a 1% tax deducted at source (TDS) on every transaction. Moreover, 18% GST is also applicable to the platform charges for the crypto exchanges.
The current tax regime has negatively affected trading in the market, liquidity, and participation of investors in domestic exchanges, industry experts say.
The industry estimates that over 72% of crypto trading in India has moved overseas in FY25, primarily driven by high taxes in the country and the trading flexibility offered by foreign exchanges.
Despite these hurdles, the crypto market in India remains large. The cryptocurrency transaction volume reportedly crossed Rs. 51,000 crore in FY2024-25, which reflects a 41% year-on-year growth.
In the meeting, crypto exchanges had called for the existing 1% TDS to be lowered to 0.1%, stating that the current rate is demoralizing active trading and driving capital outside of India.
Another major concern raised by industry executives was that the Indian tax regime currently does not provide any offsetting facility to crypto traders. This means traders could still have tax obligations even if they suffer losses in the entire portfolio in the midst of market volatility.
The industry feels that a lower TDS will help to improve domestic liquidity, boost trading on Indian trading platforms, and reduce the number of users shifting to overseas exchanges.
Chairman Bhartruhari Mahtab is said to have said that although virtual digital assets are taxable as per existing laws, it is important to learn from the international crypto regulatory systems before the draft of the long-term regulations for virtual digital assets is finalized.
The committee discussed the regulatory methods applied by countries such as Japan, Brazil, and China. China has a rigorous policy. While countries such as Japan use a more structured licensing and compliance framework for crypto companies.
As India's legislative bodies consider how to strike a balance, they are grappling with concerns about innovation, taxation, investor safety, and financial oversight while ensuring they do not harm the growing blockchain industry.
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Despite the uncertainty caused by the regulations, India still ranks among the largest crypto markets globally. The nation is also a leading hub for blockchain talent and Web3 startup development.
The outcome could significantly influence whether India becomes a regulated global crypto hub or continues to see capital and innovation move to more favorable international jurisdictions.
