Calls for regulatory clarity grow as crypto platforms argue that current tax policies are pushing trading activity beyond India’s borders.
India’s cryptocurrency industry is once again raising concerns over the country’s tax framework, with industry leaders warning that high transaction costs and regulatory uncertainty may be encouraging investors to move their trading activity to offshore platforms.
Among the strongest voices is Edul Patel, Founder and CEO of Mudrex, who argues that the current taxation structure is creating unintended consequences for the domestic digital asset ecosystem. His comments come at a time when major economies, including the United States and the European Union, are moving toward clearer regulatory frameworks for cryptocurrencies. Patel says that the US CLARITY Act is a clear step toward regulatory certainty, while India’s current tax structure is pushing users to offshore platforms and leaving compliant exchanges at a disadvantage.
The tax rules at the centre of the debate.
India currently imposes a 30% tax on gains from virtual digital assets, alongside a 1% Tax Deducted at Source (TDS) on every crypto transaction. While these measures were introduced to improve transparency and track market activity, industry participants argue that they have reduced liquidity and increased trading costs for retail investors. According to Patel, the structure affects investors regardless of whether they generate profits, as the TDS is applied to transaction value rather than earnings. Industry executives claim this has made trading on regulated domestic exchanges less attractive compared to offshore alternatives.
One of the key concerns highlighted by crypto companies is the migration of trading volumes outside India. Industry estimates suggest a significant portion of Indian crypto activity has moved to foreign platforms where users face fewer tax-related frictions. Experts argue that this trend could limit regulatory visibility into transactions while reducing the effectiveness of policies designed to monitor the sector. The issue has become increasingly relevant as global jurisdictions introduce clearer compliance frameworks aimed at bringing digital asset activity within regulated environments.
Industry seeks a dedicated crypto framework.
Beyond tax reforms, market participants are advocating for a comprehensive regulatory framework that formally recognises virtual digital assets as a separate asset class. Industry leaders have called for clearer licensing requirements, investor protection measures, and compliance standards that would allow exchanges to operate with greater certainty.
The debate reflects a broader policy challenge facing India: balancing investor protection and regulatory oversight while ensuring innovation and capital remain within the country. As global crypto regulation evolves, the direction India chooses could play a significant role in determining whether digital asset activity continues to move offshore or returns to regulated domestic platforms.