India Urged to Revise Crypto Taxes as Trading Moves Offshore Before Union Budget
Industry groups, exchanges and some lawmakers are pressing India to revisit crypto taxation ahead of the Union Budget as retail and professional trading shifts to offshore platforms. Stakeholders cite rigid capital-gains treatment, high withholding/levy practices and unclear rules for crypto-to-crypto trades, staking rewards and derivatives as drivers pushing liquidity off domestic exchanges. Exchanges report falling retail volumes and thinner order books; some institutions delay onboarding or cut Indian operations. Policymakers are weighing tweaks to clarify definitions (asset vs currency), simplify reporting and ease withholding to retain trading and custody onshore. The debate balances near-term revenue collection against preventing capital flight and preserving onshore market oversight. For traders, potential outcomes include short-term volatility in local exchange volumes and on-chain flows; a clearer, trade-friendly tax regime could restore onshore liquidity, while continued ambiguity or high tax burdens may sustain migration to foreign venues. Primary keywords: India crypto tax, crypto taxation India, Union Budget crypto. Secondary keywords: offshore crypto trading, domestic exchanges, tax reform, trader migration.
Bearish
The news is bearish for onshore Indian crypto market liquidity and short-term trading volumes. Reports of retail and institutional trading migrating to offshore venues, thinner order books and delayed institutional onboarding point to reduced onshore demand and price discovery for India-focused pairs. Unclear tax treatment (crypto-to-crypto, staking, derivatives) and high withholding increase compliance costs and lower net returns, incentivizing traders to use foreign exchanges or peer-to-peer channels—reducing domestic exchange volumes and OTC liquidity. In the short term this can increase volatility and widen bid-ask spreads for India-anchored trading pairs and may pressure local prices if selling pressure moves offshore. Over the longer term the direction depends on policy response: if the government clarifies rules, aligns definitions, and eases withholding/reporting burdens, onshore liquidity and market stability could recover (neutral to mildly bullish). If ambiguity or punitive tax measures persist, sustained migration offshore could permanently shrink the taxable base and domestic liquidity (continued bearish).