Regulatory U-Turn? As RBI Softens, India May Slash Crypto Tax From 1% to 0.1%

In what could be a major boost for India’s crypto market, the government is reportedly considering a big cut in the crypto transaction tax from the current 1% to just 0.1%. This possible move comes after growing demands from the crypto industry, which says high taxes are forcing users to trade on offshore platforms.

Hope Returns for India’s Crypto Sector

Since 2022, India has imposed a 30% capital gains tax and a 1% Tax Deducted at Source (TDS) on every crypto transaction. These measures were intended to monitor digital assets and reduce illegal activity. But industry experts believe they have done more harm than good. Many Indian users shifted to foreign platforms to avoid high tax deductions, leading to a sharp decline in local crypto activity.

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A recent study shows that more than 90% of crypto trading by Indians is now happening outside the country. Industry leaders say that a lower tax of 0.1% could still help the government track transactions while keeping traders and investors within India’s borders.

Global Players Re-Enter the Scene

In a sign of changing times, major global crypto exchanges like Coinbase and Binance, which had earlier pulled back from India, are now making a return. They seem encouraged by the softer approach of Indian regulators and the rising interest in crypto across the world.

The shift in attitude is also linked to global political changes. With Donald Trump’s return to the White House and his open support for cryptocurrencies, many countries including India are taking a fresh look at how they regulate digital assets.

More Meetings, More Demands

The Indian crypto industry is now in more regular contact with policymakers. Discussions that once happened twice a year are now taking place almost every week. The focus of these talks is to make crypto regulations more balanced and practical.

The main demand is for a cut in the 1% TDS, which traders say discourages even small transactions. A 0.1% rate, they argue, would not only reduce the burden but also increase compliance.

RBI’s Changing Tone

The Reserve Bank of India (RBI), once known for its tough stance on crypto, seems to be taking a more neutral approach. The central bank had earlier compared cryptocurrencies to Ponzi schemes and even pushed for a ban in 2018, which was later struck down by the Supreme Court. Now, officials are reportedly waiting for the government to release an updated crypto policy paper.

While the RBI is still cautious, it is no longer completely opposed. This shift is giving the crypto industry some much-needed breathing room.

What Lies Ahead

India’s economic affairs department is currently working on a revised discussion paper for the crypto sector. While the recent Union Budget didn’t offer any tax relief, experts believe change is on the horizon.

The Supreme Court has also asked the government why there is still no clear law for cryptocurrencies. It expressed concern over the delay in creating proper regulations.

Meanwhile, public interest in crypto is growing, especially among the youth and tech-savvy investors. However, many people in India still wrongly believe that crypto trading is illegal. Clearing up such confusion will be key to building trust in the system.

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India’s crypto market is valued at around $2.5 billion today and could grow to over $15 billion by 2035. A friendlier tax policy could be the push it needs to get there.

As global trends shift and India shows signs of a more open approach, the future of crypto in the country may finally be looking up.

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