India’s CBDT Debates Urgent Need for New Virtual Digital Assets Law – Is the Framework Outdated?

India's tax authority cracks open the crypto regulatory Pandora's box—again.

The 30% Question

With VDA transactions already slapped with a heavy tax burden, the Central Board of Direct Taxes (CBDT) now questions whether existing laws can handle Web3's breakneck evolution. No numbers disclosed—just bureaucratic soul-searching.

Regulatory Whiplash

From outright bans to taxed-but-not-legal limbo, India's crypto stance gives investors whiplash. The CBDT's latest musings suggest even they don't trust their own rulebook.

The Bureaucrat's Dilemma

Create innovation-friendly frameworks? Or protect the rupee's monopoly? Meanwhile, traders VPN-hop to offshore exchanges—because nothing inspires regulatory creativity like lost tax revenue.

Watch this space. Or just watch Indian crypto OGs bypass the system entirely—some traditions never change.

India Crypto Tax Concerns

At present, crypto gains face a steep 30% flat tax with no loss set-off, plus a 1% TDS on every trade. Industry players say this has crippled liquidity and pushed volumes abroad. The Indian government admitted it currently lacks a real-time system to track income from cryptocurrency transactions, even after collecting over ₹700 crore in taxes in two years.

CBDT is now asking whether this 1% TDS is too high, and what the ideal rate should be. Further, the agency is deliberating whether disparate TDS norms should be adopted for retail traders, institutions, and market makers.

The survey also addresses operational concerns, such as checking counterparties’ domicile, correctly valuing VDAs, and dealing with peer-to-peer transactions. CBDT has also asked whether Indian exchanges are ready to comply with the OECD’s global crypto reporting framework (CARF), designed to prevent tax evasion across borders.

Expert Opinions and Outlook

Interestingly, some Indian exchanges have started offering futures and options trading, where TDS is lower, but there’s still no legal clarity on derivatives, offshore transactions, or even the precise definition of “VDA.”

Purushottam Anand, Founder of crypto law firm Crypto Legal, said India will likely bring in a complete VDA regulation. He also stated that the government is doing a thorough examination of VDAs this year, based on global issues such as G20 papers and recent legislative studies. Anand stressed that India feels that any rule or ban will be most effective when implemented with strong international collaboration.

Experts believe this consultation could be the first step toward a comprehensive VDA law. According to legal experts, global consensus today is moving towards regulation, not bans. With advanced markets embracing crypto as a legitimate asset class, there’s hope that India may ease taxes and set clearer rules to retain traders.

Also Read: AKTU Becomes 1st Indian UNI to Use Blockchain for 50K Degrees