India’s top tax authority, the Central Board of Direct Taxes (CBDT), has begun extensive consultations with cryptocurrency exchanges and industry participants to assess if a new digital asset law is needed.
As per a report from the Economic Times, the CBDT has asked crypto players if India requires a fresh law for Virtual Digital Assets (VDAs). And if a new law is needed, the CBDT also wants to know which regulator should oversee it. Options include SEBI, RBI, MeitY, or FIU-IND.
The agency is also probing how much Indian crypto trading has moved offshore, particularly to hubs like Dubai. It also wants to understand why traders are leaving India. The initiative indicates that the government might be rethinking its stringent approach to taxing and regulating cryptos.
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.
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