No Relief in Union Budget 2025
India’s Union Budget 2025 offered zero changes to the nation’s crippling crypto tax regime. The flat 30% tax on gains from Virtual Digital Assets (VDAs), introduced under the Finance Act 2022, remains firmly in place. Under Section 115BBH, only the purchase cost can be deducted—no write-offs for transaction fees, losses, or infrastructure costs.
But the 30% hit isn’t even the worst part. Crypto transactions still face a 1% Tax Deducted at Source (TDS) for amounts over ₹10,000 (~$115), plus a 4% cess on the total liability. The tax is deducted regardless of profit or loss, and applies to every trade—a policy traders say is killing liquidity.
New Burdens in 2025
What really turned heads in Budget 2025 is the rollout of Schedule VDA, a new tax form section requiring individuals and companies to report every crypto trade in detail—date, amount, cost, and price.
Exchanges must also file detailed transaction reports with tax authorities. Even worse, the Central Board of Direct Taxes (CBDT) is ramping up enforcement and penalties.
If unreported gains are found during tax raids, they could now be taxed at 60%, with additional surcharges and penalties. Even innocent errors can lead to 200% fines, interest, or jail time up to 7 years.
A government official described this shift bluntly:
1% TDS Backfires, Pushes Users to Offshore Platforms
India’s TDS policy was meant to track and control crypto trading—but it did the opposite. A study by the Esya Centre showed that 5 million Indian users migrated to foreign platforms after the 1% TDS came into effect in 2022.
Between July 2022 and July 2023, Indian users traded over $42 billion on offshore exchanges. Just $0.84 million of the total TDS collected came from these foreign platforms—barely 0.2% of the estimated lost revenue.
Domestic exchanges were hit hard. Downloads, traffic, and user activity collapsed by up to 74%. Platforms like WazirX and WeTrade halted services, blaming high taxes and regulatory hostility.
A Global Outlier in Crypto Taxation
India’s crypto tax stance is among the harshest globally. Its 30% flat tax places it alongside Belgium, Iceland, and Japan, countries that tax crypto gains as high as 50%.
In contrast, Singapore and Dubai impose zero tax on personal crypto gains, fostering thriving Web3 industries. Even the US provides relief for long-term holders, capping tax at 20% and allowing deductions.
India treats crypto like gambling, not investment. It makes no distinction between long- or short-term gains, bans loss offsets, and heavily penalizes mistakes. For many traders, it’s simply not worth the risk.
Hopes for Reform?
Despite the grim outlook, there are small signs of change. India is engaging in global crypto policy discussions at the G20 Summit, and Reuters reported that the government may revise the TDS and gains tax under pressure from international trends.
Industry leaders argue that easing the tax burden could reignite local exchanges, stem capital flight, and re-establish India as a serious player in the $3.3 trillion global crypto market.
A senior tax advisor remarked:
For now, however, traders remain cautious, with many parking their assets in Dubai and Singapore, using the Liberalised Remittance Scheme to shift up to $250,000 per year abroad.
