Majority of Indian Crypto Investors Seek Tax Rules Similar to Stocks and Mutual Funds
A new survey reveals a strong preference among Indian cryptocurrency investors for a significant overhaul of the current tax system. The study, conducted by crypto investment platform CoinSwitch ahead of the upcoming Union Budget, shows most investors want their digital asset investments to be taxed in a manner similar to traditional financial products like stocks and mutual funds.
Investors Favor Familiar Tax Framework
According to the survey findings, a clear majority of 61% of respondents are in favor of aligning cryptocurrency taxation with the existing framework for equities and mutual funds. This preference suggests that investors seek familiarity and consistency in how their investments are treated by tax authorities. Currently, long-term gains from listed equities and equity mutual funds held for over one year are taxed at a concessional rate of 10%, with benefits like indexation available for debt mutual funds.
In contrast, a smaller segment, representing 17% of those surveyed, supports the creation of a completely new, standalone tax regime designed specifically for virtual digital assets (VDAs). This view likely stems from a belief that cryptocurrencies are a unique asset class requiring tailored rules rather than being forced into existing categories.
Widespread Dissatisfaction with Current Crypto Tax Rules
The survey highlights a significant sentiment of dissatisfaction with the tax rules introduced in the 2022 Union Budget. A substantial 66% of crypto investors view the current taxation regime as unfair. The primary points of contention are the high tax rate and the structure of the tax deducted at source (TDS) provision.
Currently, profits from the transfer of cryptocurrencies and other VDAs are taxed at a flat rate of 30%, with no provision to offset losses against other income. Additionally, a 1% TDS is levied on every transaction above a certain threshold, which investors argue locks up capital and increases compliance burdens, especially for active traders.
Calls for Rationalization and Clearer Regulation
The strong feedback from the investor community underscores a pressing need for rationalization of the tax code and clearer, more supportive regulations. Investors and industry bodies have consistently argued that the high tax rate and the 1% TDS are stifling the growth of the domestic crypto ecosystem, pushing trading volumes to offshore platforms.
The survey results are expected to be part of the industry’s representation to the government, advocating for changes that could bring more clarity, fairness, and growth potential to the sector. Proponents of reform argue that a more balanced tax approach could encourage innovation, increase compliance, and bring trading activity back to regulated Indian exchanges.
As the government prepares the next budget, the finance ministry will weigh these requests against broader macroeconomic and regulatory considerations. The outcome will be closely watched by millions of crypto investors and the burgeoning fintech industry in India, signaling the government’s future stance on this evolving asset class.
