India’s Tax Authority Pushes to Reshape Crypto Framework

India’s Central Board of Direct Taxes (CBDT) is scrutinizing the country’s crypto tax regime, particularly the 1% tax deducted at source (TDS) and the lack of regulatory clarity for VIRTUAL digital assets (VDAs). The stringent tax policies have driven many crypto platforms to relocate to jurisdictions like Dubai, seeking relief from high compliance costs and liquidity constraints.

The current framework imposes a 30% tax on crypto profits, a 1% TDS on transactions exceeding ₹10,000 annually, and an 18% GST on platform fees. Industry advocates argue the TDS rate stifles trading volume, with proposals to lower it to 0.01% rejected by authorities over concerns about weakening tax oversight in a high-risk sector.

Regulatory ambiguity persists around derivative trading, cross-border transactions, and the definition of VDAs. The CBDT is pressing platforms to demonstrate readiness for international standards, such as the OECD’s Crypto-Asset Reporting Framework, signaling potential alignment with global norms.