Indian cryptocurrency industry demands "abolition of 30% tax and 1% TDS" for significant tax relief from the government = report

Table of Contents* 1. Indian cryptocurrency industry lobbies for tax relief

• 2. Current Situation and Issues of India's Cryptocurrency Tax System
• 3. Specific tax reform proposals demanded by the industry

• 3.1. Request for significant reduction of TDS (Withholding Tax)
• 3.2. Proposal to review the flat 30% tax rate
• 3.3. Growth Outlook of the Indian Cryptocurrency Market

• 4. The movement for cryptocurrency tax reform is accelerating in Japan.

• 4.1. Review of taxation on virtual currency holdings by corporations
• 4.2. The taxation of cryptocurrency assets for individual investors will also be reformed.
• 4.3. Roadmap for Tax Reform by the Financial Services Agency and Government

Indian Cryptocurrency Industry Lobbying for Tax Reforms

On May 27, 2025, it became clear that the virtual currency (crypto asset) industry in India is actively engaging in lobbying efforts to request the relaxation of strict tax measures from the government.

According to reports from the Financial Times (FT) in the UK, the industry is strongly advocating for the reduction or abolition of the "30% tax on profits from virtual currencies" and "1% TDS (withholding tax) per transaction" introduced in 2022, as they are shrinking domestic transactions.

The Modi administration has been cautious regarding cryptocurrency so far. However, in light of President Trump's return to power, the U.S. is shifting its policy towards promoting cryptocurrency, prompting the Indian government to soften its stance as well.

Major companies in the virtual currency and Web3 industry are participating in lobbying activities, and the industry association "Bharat Web3 Association" is also playing a central role.

Since 2023, the association has consistently called for tax cuts from the government. Although it expressed disappointment when tax reform was postponed in the budget proposal in February, it has shown a willingness to continue promoting tax reform.

Current Status and Issues of Cryptocurrency Taxation in India

The current state of cryptocurrency taxation in India is known to be one of the strictest in the world.

In the 2022 tax reform, income from virtual currency is subject to a flat tax rate of 30%, and 1% TDS (withholding tax) will be deducted for each transaction.

Additionally, losses incurred from cryptocurrency transactions cannot be offset against other profits, and carryover deductions to the following year are also not permitted. The Indian government explains that these measures are in place "to prevent the misuse of cryptocurrencies for fraudulent activities."

However, as a result, domestic trading has drastically decreased, and it has been reported that many individual investors and traders have moved to overseas exchanges.

There are analyses indicating that the trading volume of virtual currency in India decreased by over 90% after the introduction, and industry stakeholders are concerned that "the current high tax rates are hindering the healthy development of the domestic market."

Specific Tax Reform Proposals Required by the Industry

In response to this situation, the Indian cryptocurrency industry is presenting concrete tax reform proposals to the government.

Request for a significant reduction in TDS (withholding tax)

The main focus is on the "elimination of the 1% TDS" or "significant reduction".

The industry group Bararat Web3 Association (BWA) has consistently advocated for a reduction in tax rates since the initial introduction of TDS, and their demand level has become a substantial tax reduction request of from 1% to 0.01%.

BWA presents multiple survey data and argues that significantly lowering the tax rate would not hinder transaction tracking, and rather, it is highly likely to lead to an increase in government revenue due to the domestic return of transactions.

There are also indications that "the TDS tax rate is high at 1%, resulting in the capital required for transactions being fixed, which reduces market liquidity," and the industry is calling for a reduction of the burden to at least around 0.1%.

Proposal to review the flat 30% tax rate

In addition, there are calls for a review of the flat tax rate of 30%.

There are opinions suggesting that rather than a uniform high tax rate as currently implemented, consideration should be given to the introduction of a progressive tax rate similar to other assets and a reduction in the tax rate itself.

Moreover, there have also been requests to recognize at least the carryover deduction for losses and to revise taxation to reflect the actual situation of investment income.

Industry insiders warn that "excessive taxation on cryptocurrency transactions will drive investors and businesses out of the country, ultimately harming the national interest."

We are urging the government to reconsider the balance between international cooperation on tax policy and industrial development.

Growth Outlook of the Indian Cryptocurrency Market

Such strict tax regulations were intended for the purpose of "monitoring illegal activities"; however, it has been pointed out that as a result, over 90% of cryptocurrency transactions within India have flowed to overseas exchanges.

Therefore, industry groups are urging the government by presenting data that "lowering the tax rate will bring transactions back domestically, which will rather lead to an increase in government tax revenue."

The size of the cryptocurrency market in India is currently about $2.5 billion (approximately 360 billion yen), but it is projected to expand to over $15 billion (approximately 2.2 trillion yen) by 2035. The strong demand from industry groups for tax cuts from the government is backed by this significant growth potential.

The industry emphasizes that appropriate environmental development is urgent, given this growth potential.

The Movement for Cryptocurrency Tax Reform is Accelerating in Japan

Meanwhile, alongside India's actions, the reform of the cryptocurrency (coin) tax system is rapidly advancing in Japan.

Review of corporate holdings of virtual currency valuation taxation

In particular, the revision of tax rules concerning the unrealized gains of cryptocurrency assets held by corporations has become a prominent issue in recent years.

In Japan, until now, the cryptocurrency assets held by companies were taxed on unrealized gains based on the market value at the end of the period. However, due to the tax reform in the 2023 fiscal year, tokens issued by the company are now exempt from market value taxation at the end of the period.

Furthermore, the tax reform outline for the fiscal year 2024 clearly states the policy to exclude year-end assessment taxation for cryptocurrency assets held by third parties who are not issuers, under certain conditions.

This is expected to significantly reduce the burden for companies dealing with cryptocurrencies.

The taxation of cryptocurrency assets for individual investors will also be reformed.

While corporate-level tax reforms are progressing, there is also a growing momentum for reforming the tax system related to individual investors.

In the tax system reform outline for the fiscal year 2025 approved by the ruling party at the end of 2024, cryptocurrency was positioned as a "financial product that contributes to the asset formation of the people."

It is included that a review of the taxation method is being considered in the direction of treating it like other financial products.

Specifically, it is stated that a proposal to apply the same separate taxation (20% tax) for declared income on profits obtained from cryptocurrency assets, similar to stocks, is under consideration.

Under this policy, it is also included that cryptocurrency exchange operators will be subjected to investor protection measures equivalent to those in the stock market (such as the obligation to provide tax information like balance reports).

Comprehensive institutional development is being promoted to bring cryptocurrencies closer to traditional financial assets from both tax and regulatory perspectives.

Financial Services Agency and Government Tax Reform Roadmap

The background of this tax system review is the proactive policy shift by Japan's financial authorities.

The Financial Services Agency has pointed out the "necessity to consider the taxation treatment of cryptocurrency transactions" starting from the tax system request stage in September 2024. This policy was reflected in the tax reform outline in December of the same year.

In March 2025, the Liberal Democratic Party's Web3 project team (Web3WG) announced a proposal for a legal amendment to position "cryptographic assets as a new asset class under the Financial Instruments and Exchange Act."

Among these, it proposes bold tax reforms such as the introduction of a 20% separate taxation on capital gains from cryptocurrency transactions and the lifting of restrictions on loss carryforwards.

In April 2025, the Financial Services Agency will publish a proposal to classify cryptocurrencies into two categories: "fundraising type" and "non-fundraising type" for regulatory purposes, and will be collecting public opinions until May.

This series of movements is considered a preparatory stage to clarify the positioning of cryptographic assets in Japan and to transition to a treatment consistent with other financial products in terms of taxation.

The government is advancing a concrete plan to implement relevant legal and tax reforms by the regular Diet session in 2026.

It is expected that if fundamental tax and regulatory reforms, such as reducing the highest individual tax rate from 55% to 20%, are realized, Japan's cryptocurrency market competitiveness will significantly improve.

*The price is based on the exchange rate at the time of writing (1 dollar = 144.12 yen).

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Source: Financial Times report

Written and Translated by: BITTIMES Editorial Department

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