India Crypto Industry Pushes Tax Reform Ahead of Feb Budget

Source: CryptoTale Original Title: India Crypto Industry Pushes Tax Reform Ahead of Feb Budget Original Link: India’s February Union Budget has renewed focus on crypto tax laws as domestic exchanges seek changes to the current framework. Industry leaders say the existing rules limit growth, despite stronger compliance standards and tighter regulatory oversight across the sector.

India introduced its crypto tax regime in 2022. The framework applies a flat 30% tax on digital asset gains. It also enforces a 1% tax deducted at source on most transactions. Traders cannot offset losses against gains.

According to crypto platforms, these regulations no longer accurately represent the state of the market. They contend that more transparent regulatory frameworks now govern the use of digital assets. They also point to growing institutional adoption and stronger enforcement tools.

The renewed calls come as policymakers finalize fiscal priorities. The Union Budget, scheduled for February 1, offers a rare opportunity for tax adjustments. Officials can recalibrate taxes without passing new legislation.

Exchanges Seek Relief from Transaction-Level Taxes

Domestic exchanges say transaction taxes place sustained pressure on compliant platforms. They warn that heavy tax friction drives users and liquidity offshore. As a result, oversight goals face growing challenges.

Nischal Shetty, founder of WazirX, said India stands at a key moment. He told media outlets that the country can refine its crypto framework. He highlighted the need to balance enforcement with innovation.

Shetty said the framework should align with global Web3 progress. He pointed to wider institutional participation and evolving regulations abroad. According to him, India has strengthened oversight since 2022.

He added that lower transaction-level taxes could restore onshore liquidity. He also said reviewing loss offset rules could improve compliance. In his view, such changes would keep economic activity within India.

Raj Karkara, chief operating officer at ZebPay, echoed similar concerns. He described the upcoming budget as a pivotal moment for crypto. Karkara said the 1% TDS continues to hurt trading activity. He explained that reducing the TDS could improve liquidity. He also said reviewing the flat 30% tax could create predictability. According to him, stable tax rules help long-term participation.

Global exchanges have also joined the discussion. A representative from a certain head exchange said the budget offers a chance for recalibration. He said retail participation has grown steadily in India. The executive called for a system focused on realized capital gains. He suggested limited loss offsets and removal of transaction levies. He said this approach would improve fairness for users.

He also stressed the need for clear operating standards. He said alignment with AML, KYC, and investor protection rules remains essential. According to him, clarity would support job creation and domestic capabilities.

Reform Calls Rise Amid Tighter Enforcement

The push for tax reform comes during stricter enforcement. Indian regulators have expanded compliance requirements for crypto platforms. Authorities say these steps strengthen oversight and protect users.

Recently, the Financial Intelligence Unit announced new KYC rules. Exchanges must now verify users through live selfie checks. They must also use geolocation, IP tracking, and bank verification.

The rules also require additional government-issued identification. Regulators say the measures improve traceability. They also aim to reduce misuse of digital asset platforms.

Meanwhile, tax authorities have raised enforcement concerns. Officials say offshore exchanges complicate income tracking. Private wallets and decentralized tools also pose challenges.

Income Tax Department officials have briefed lawmakers on these issues. They warned that cross-border platforms limit visibility. They also highlighted gaps in tracking taxable crypto income.

Despite these concerns, exchanges say compliance standards already meet regulatory goals. They argue that tax relief would strengthen oversight outcomes. Industry leaders now await signals from the February budget.