Big Shake-Up Coming: India’s New Tax Law Could Transform Crypto Trading

India’s Crypto Tax Burden Could Ease as Government Prepares New Income Tax Bill

India’s cryptocurrency community is watching closely as the government prepares to introduce a new Income Tax Bill that could reshape the way digital assets are taxed in the country.

The Ministry of Finance confirmed this week that the Income Tax Bill 2025, which was tabled earlier this year, has been officially withdrawn. A revised version will be presented in Parliament on August 11, replacing the existing Income Tax Act of 1961. While the exact provisions remain under wraps, investors and industry leaders are hopeful that the new bill could provide much-needed relief from the country’s strict crypto tax regime.

Current Crypto Tax Structure Under Fire

Under current Indian tax law, profits from the sale or transfer of digital assets such as Bitcoin, Ethereum, and other cryptocurrencies are subject to a flat 30% tax, regardless of whether the gains are short-term or long-term. On top of this, there is a 1% Tax Deducted at Source (TDS) applied to transactions exceeding ₹10,000 (approximately $120).

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For many retail traders and small-scale investors, this system has proven to be a significant barrier to active trading. Critics argue that it has discouraged participation in the local market and driven trading volumes offshore to jurisdictions with lower tax burdens.

"The current structure makes active trading almost impossible. We are forced to either hold our assets without realizing gains or move to foreign exchanges where taxes are more favorable," said one Mumbai-based trader who asked not to be named.

A Parallel Crackdown on Unreported Income

While discussions about tax reform gain traction, authorities have stepped up enforcement of the existing rules. According to officials, the Income Tax Department has issued over 44,000 notices to individuals who failed to report cryptocurrency transactions in their annual filings.

Investigators say they uncovered ₹630 crore (approximately $75 million) worth of undeclared digital assets through search and seizure operations. These assets were traced using blockchain analytics, wallet addresses, and exchange transaction records.

"The message is clear," one senior tax official told ABC-style reporters. "Crypto gains are taxable, and failure to report them will result in consequences. We are monitoring both domestic and international exchanges for compliance."

This enforcement push has added to the pressure on traders, many of whom feel caught between punitive tax rates and increased government scrutiny.

The Legal Grey Area

India’s stance on cryptocurrency remains one of cautious ambiguity. Digital asset trading is not banned, but it is also not fully regulated.

Crypto exchanges operating in India must register with the Financial Intelligence Unit – India (FIU-IND) and comply with the Prevention of Money Laundering Act (PMLA). However, there is no single comprehensive legal framework that governs how cryptocurrencies can be used, traded, or held.

This lack of clarity has left many investors in limbo. While the government has hinted at regulating the sector, it has so far resisted calls to reduce the tax rate or eliminate TDS requirements.

The COINS Act 2025: A Possible Game-Changer

One legislative development that could change the landscape is the proposed India COINS Act 2025. Still in draft form, the bill aims to establish a legal framework for the cryptocurrency industry. Key provisions reportedly include:

• Tax exemptions for certain categories of transactions, such as small-value trades and peer-to-peer transfers.

• Allowing investors to self-custody their digital assets without mandatory reliance on exchanges.

• The creation of an independent regulator, the Crypto Asset Regulatory Authority (CARA), to oversee market operations and compliance.

The draft draws inspiration from international models, including Singapore’s regulatory sandbox and the European Union’s Markets in Crypto-Assets (MiCA) legislation. If enacted, proponents believe it could boost investor confidence, attract institutional participation, and promote innovation in the sector.

India’s Growing Role in the Global Crypto Market

Despite its regulatory hurdles, India has quietly become one of the largest holders of cryptocurrency in the world. According to industry estimates, Indian investors collectively hold close to 1 million Bitcoins, second only to the United States.

Notably, the majority of these holdings are owned by retail investors, not large institutions. This grassroots adoption highlights the country’s appetite for digital assets, even in the face of challenging regulations.

However, analysts argue that India’s high tax rates and uncertain legal environment are preventing major domestic and international institutional investors from entering the market.

"India has the potential to be a global leader in crypto innovation, but the tax and compliance burden is a major deterrent," said a senior analyst at a Singapore-based fintech consultancy.

What to Expect on August 11

All eyes are now on August 11, when the revised Income Tax Bill will be presented. While there is optimism, many industry insiders remain cautious. The government has so far made no official statement indicating that the flat 30% tax rate will be reduced.

There is also speculation that rather than eliminating TDS, the new bill may simply lower the threshold or adjust the rate to ease compliance burdens.

"It’s unlikely that the government will scrap the tax entirely," said the head of compliance at a leading Indian exchange. "What we might see is a more nuanced structure that differentiates between casual traders, institutional investors, and long-term holders."

The Stakes for India’s Digital Economy

The stakes are high. The way India chooses to tax and regulate cryptocurrencies could have far-reaching implications for its broader digital economy. A favorable framework could attract foreign investment, encourage domestic innovation, and position India as a regional hub for blockchain development.

On the other hand, maintaining the status quo could continue to push traders and capital overseas, limiting the country’s potential in what many consider the next frontier of financial technology.

Final Word

For now, Indian crypto traders find themselves navigating a tightrope between strict taxation and unclear regulation. The withdrawal of the current Income Tax Bill offers a rare opportunity for policymakers to address the sector’s concerns, but whether meaningful change will come remains uncertain.

As Parliament prepares to debate the new bill, the question remains: will this be the moment India eases its crypto tax burden, or will it double down on its current approach?

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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