- India still taxes VDA income at 30%, while qualifying transfers face 1% TDS.
- ₹30 lakh in crypto sales can trigger ₹30,000 TDS, even when profit is minimal.
- Offshore platforms handled over 90% of Indian VDA trading in Esya’s measured period.
India’s crypto tax debate has returned after the Bharatiya Janata Party announced new national office-bearers on August 17. The organizational reshuffle has revived discussion about wider economic reforms, although it contained no proposal to change virtual digital asset taxation.
Reports about a possible Modi cabinet reshuffle also remain speculative. Therefore, the current 30% VDA tax and 1% TDS remain firmly in place. Crypto commentator Pushpendra Singh raised possible reforms on X, including lower capital-gains taxes and changes to crypto taxation.
However, he explicitly described them as speculation. The distinction is important considering that no finance ministry announcement currently links the political reshuffle with changes to the Indian crypto tax framework.
Could Modi Cut India’s 30% Crypto Tax and 1% TDS?
India currently taxes income from virtual digital assets at 30%, alongside an applicable surcharge and a 4% health and education cess. In addition, qualifying VDA transfers face a 1% tax deducted at source, creating another transaction-level burden for investors and active traders.
Budget 2026 retained both provisions despite repeated industry demands for relief. Consequently, any future reduction would represent a significant policy reversal rather than a routine adjustment. The issue is also gaining relevance as policymakers pursue broader measures intended to support capital markets, investment, and wider economic activity.
That creates a policy question over whether crypto should retain unusually restrictive taxation while other parts of the investment landscape receive reforms aimed at participation.
Industry participants have consequently proposed reducing TDS to 0.01%, allowing loss set-offs, and reviewing the 30% tax on VDA income. However, Budget 2026 adopted none of those proposals, meaning they remain industry recommendations rather than Modi government policy.
Why the 1% TDS Creates a ₹30,000 Capital Drag
Unlike a tax charged only on profits, the 1% TDS applies to transaction consideration. As a result, withholding can occur even when investors earn minimal profits or record losses. For example, selling ₹30 lakh worth of crypto can result in ₹30,000 being withheld from the transaction.
That amount can eventually be credited against tax liability. Nevertheless, the trader immediately loses access to capital that could otherwise fund another transaction. The effect becomes more pronounced for high-turnover traders who repeatedly recycle the same money across multiple trades.
Therefore, the debate extends beyond headline tax rates. It also concerns liquidity, capital efficiency, and whether domestic platforms can compete effectively for Indian trading activity.
Offshore Trading Data Raises Pressure for Tax Reform
That concern becomes more significant when offshore trading activity is considered. Esya Centre found that Indians traded more than ₹3.5 lakh crore of VDAs through offshore platforms between July 2022 and October 2023.
The research estimated that offshore venues captured more than 90% of Indian VDA trading during the measured period. Against that backdrop, Esya recommended reducing TDS to 0.01% or replacing it with another transaction-reporting mechanism.
The findings, therefore, strengthen the argument that transaction-level taxation can encourage traders to shift activity away from domestic exchanges. That matters as offshore migration can reduce liquidity circulating through compliant Indian platforms and move potentially taxable economic activity outside the domestic market.
Consequently, a lower TDS could leave investors with more working capital while potentially encouraging more transactions to remain within the formal digital-asset economy. At the same time, a 0.01% rate could offer policymakers a middle ground by preserving transaction reporting while significantly reducing capital friction.
What Would Confirm a Real Crypto Tax Policy Shift?
The August 17 BJP reshuffle itself provides no evidence that India is preparing to reduce crypto taxes. A credible policy change would require Finance Ministry action, CBDT guidance, legislation, or amendments introduced through a future budget.
Until then, the central question remains whether the existing framework produces greater compliance benefits than the economic activity potentially lost through offshore migration. For policymakers, the choice is therefore wider than simply collecting more tax from crypto transactions.
Reducing friction could potentially deepen domestic liquidity, retain more trading capital, and increase activity across regulated platforms while maintaining transaction visibility. However, eliminating TDS entirely remains less certain as the mechanism also creates a reporting trail for tax authorities.
For now, investors should treat tax-cut expectations cautiously. The 30% tax and 1% TDS remain unchanged, and no Modi government proposal has been announced.
The real test will come if broader investment reforms eventually force policymakers to reconsider whether crypto’s current tax treatment supports India’s domestic capital and market-development goals.
Related: India’s Crypto Market Could Hit $14.2B by 2034: What’s Driving Growth Despite Taxes and Regulation?
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