Crypto Industry in India Urges Government to Ease Harsh Tax Rules

India’s crypto industry is once again calling on the government to reconsider its rigid tax structure on digital assets. Ever since the introduction of a flat 30% tax on crypto gains and a 1% TDS on every transaction, investors and exchanges alike have felt the pressure. Now, with trading volumes dropping and user activity shifting to foreign platforms, industry leaders are urging for a rethink.

The Tax That Changed Everything

In 2022, the Indian government announced a 30% tax on profits from crypto trading, similar to gambling or lottery winnings. Along with that, a 1% tax deducted at source (TDS) was imposed on every transaction, regardless of profit or loss.

This move was aimed at bringing more transparency and regulation into the crypto space. But what it ended up doing was pushing many casual and small investors out of the market altogether.

Exchanges Say They’re Losing Users

Indian crypto exchanges have reported a sharp decline in trading volumes. Many users either stopped trading or moved to international platforms that don’t fall under Indian tax laws. The industry claims this is hurting India’s potential to become a global player in blockchain innovation.

With crypto adoption growing in Tier‑2 cities and among younger investors, local platforms are struggling to retain users due to high tax friction. Even startups and entrepreneurs working on blockchain projects are reportedly moving their operations overseas.

What the Industry Wants

The industry isn’t asking for tax removal—it’s asking for a rational and fair structure. One of the main demands is to reduce or remove the 1% TDS, which discourages active trading and creates unnecessary paperwork, especially for small investors.

They also want the classification of crypto income to be revised. Comparing it to speculative gambling income doesn’t align with how digital assets are being used globally for payments, DeFi, and Web3 development.

Government’s Balancing Act

The government has so far maintained a cautious stance. While it’s shown interest in blockchain as a technology, it continues to be wary of crypto as a financial instrument due to its volatile nature and potential misuse.

There have been closed-door meetings and public comments from officials, but no concrete policy shift has been announced yet. The finance ministry is reportedly reviewing industry inputs, but with elections and other priorities on the table, any changes could take time.

Conclusion

India’s crypto industry is at a critical juncture. The current tax policies, though well-intended, might be slowing down innovation and pushing users away. A balanced tax approach that supports innovation while maintaining safeguards is what many believe is the need of the hour. As Tier‑2 cities begin to embrace digital finance, the rules that govern them need to be equally forward-looking