Indian crypto exchanges urge tax-rule reform ahead of February budget
Major Indian cryptocurrency exchanges and industry leaders are urging tax-rule reform ahead of the Feb. 1 federal budget. Since 2022 India has imposed a 30% flat tax on crypto gains and a 1% TDS (tax deducted at source) on most transactions while disallowing the offset of trading losses. Executives from WazirX, ZebPay and Binance Asia Pacific say the transaction-level 1% TDS and the ban on loss set-offs are draining onshore liquidity, pushing trading activity offshore, and discouraging retail and institutional participation. They propose modest reductions to the 1% transaction TDS, reconsideration of the 30% unified rate, and limited loss offsets against realized capital gains to restore liquidity and onshore activity. The calls for recalibration come as enforcement tightens: India’s Financial Intelligence Unit has introduced stricter KYC measures (live selfie checks, geolocation/IP tracking, bank verification and extra IDs) and tax authorities warn of enforcement challenges from DeFi, private wallets and offshore exchanges. Exchanges argue clearer VDA operational standards plus calibrated tax changes would boost compliance, attract institutional capital and keep trading volumes domestic. Key keywords: India crypto tax, TDS reform, onshore liquidity, KYC/AML measures.
Neutral
The news is neutral for crypto market prices. Requests by major Indian exchanges to reduce the 1% transaction TDS, allow limited loss offsets, and reconsider the 30% flat tax are pro-liquidity and, if enacted, could be mildly bullish by restoring onshore trading volume and encouraging institutional participation. However, these are policy requests ahead of the Feb. 1 budget, not confirmed changes. Meanwhile, concurrent tighter KYC/enforcement increases compliance costs and could offset some positive effects by raising barriers for marginal traders. In the short term, uncertainty ahead of the budget likely sustains muted price reaction and could increase volatility around announcements. In the medium-to-long term, a successful recalibration that reduces transaction-level TDS and permits limited loss offsets would likely support higher onshore volumes and improved market depth (bullish impulse). Conversely, if authorities keep current rules or further tighten enforcement, onshore liquidity may remain constrained and activity could shift offshore (bearish impulse). Overall, the immediate price impact is limited until concrete legislative changes are enacted, so classify as neutral.