CBDT seeks crypto industry views on need for new law governing digital assets
Uncertainty around taxation, banking access, and FEMA rules continues to trouble India’s virtual digital asset market
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The Central Board of Direct Taxes (CBDT) has reportedly begun consultations with cryptocurrency industry stakeholders on whether India requires a new, dedicated law to govern virtual digital assets (VDAs).
The move comes amid persistent ambiguities in taxation, banking access, and foreign exchange regulations for crypto traders and investors.
Currently, income from trading or investing in cryptocurrencies is taxed at a flat 30% under India’s Income Tax Act, a rate significantly higher than the long-term capital gains tax on equities.
In addition, losses from one crypto asset cannot be offset against profits from another, leaving traders with limited avenues to reduce their tax burden.
Adding to the challenges, many banks have been reluctant to open dedicated accounts for crypto transactions, wary of the Reserve Bank of India’s (RBI) repeated cautionary statements about VDAs.
There is also no clear legal position under the RBI framework or the Foreign Exchange Management Act (FEMA) on whether Indian residents can legally trade on offshore cryptocurrency exchanges.
Crypto platforms have reportedly also been asked by the CBDT if the 1% tax-deducted-at-source (TDS) on every sale was too high, what should be the preferred TDS rate and why, and whether traders should be allowed to set off VDA losses to make the levy more equitable.
India has so far avoided outright banning cryptocurrencies, but regulation has largely been shaped through taxation and compliance measures rather than a comprehensive legal framework. In 2022, the Union Budget introduced a tax regime for VDAs, which included the 30% flat tax on gains and 1% tax deducted at source (TDS) on transactions, aimed at improving traceability.
However, industry players have argued that this structure has discouraged domestic trading and driven volumes to overseas platforms. Several petitions have also reached courts questioning the constitutional validity of the 30% tax and restrictions on offsetting losses.
Globally, countries are moving towards more detailed crypto-specific legislation. The European Union recently rolled out its Markets in Crypto-Assets (MiCA) regulation, while the US is debating stricter compliance rules for exchanges.
