Budget 2025: Crypto industry 'disappointed', warns high taxes, offshore migration hurting growth

Union Finance Minister Nirmala Sitharaman's Budget 2025 failed to address the concerns raised by the crypto industry in India at a time when the emerging industry is gaining widespread recognition in many advanced economies like the US, say the industry stakeholders. The key areas of discontent for the virtual digital asset industry are lack of tax relief, no steps to curtail migration of investors to offshore exchanges, no parity between domestic and offshore players, and increased compliance burden.

The industry feels that despite 2024 being a year of significant growth, marked by Bitcoin surpassing $100K and a surge in institutional investment, the government has shied away from introducing progressive measures to impact the industry positively. Though India continues to host one of the largest crypto investors, the 30% tax on closure profits and 1% TDS on transactions have hampered its growth.

Reacting to the Indian Union Budget 2025-26 and its impact on the VDA sector, Bharat Web3 Association Chairperson Dilip Chenoy says though the BWA acknowledges the government’s focus on digital transformation and its efforts to enhance regulatory clarity in the Web3 sector, it is disappointed about no changes in taxation. "The BWA supports the proposed amendments on reporting obligations for VDAs, which underscore the importance of transparency and compliance in the ecosystem. However, we are disappointed there have been no changes in the taxation framework for VDAs, despite providing data-backed justifications highlighting its impact on the industry's growth and investor participation."

Other members of the Web3 Association and players of the crypto industry echo Chenoy's views. Sumit Gupta, Founder, CoinDCX, agrees that unfortunately, "there is no relief" to the crypto industry in the Budget 2025. "We were hoping for some amendments to create parity between tax-compliant VASPs and non-compliant offshore exchanges. Despite providing the government with ample justification regarding the ambiguity in the language of the current TDS Section 194S, the concerns around Indian wealth being shifted offshore and the significant loss to the tax exchequer have been overlooked."

Gupta says international exchanges should be obligated to the same 1% TDS as compliant Indian exchanges. "As a compliant company, we are disappointed." He says measures like individual tax compliance for VDA investors will lead to more compliance burdens on domestic exchanges.

The new tax amendments introduced in the Finance Minister's Budget 2025 signal a clear shift in how crypto will be regulated in India. Now, more such assets could be taxed. "Classifying crypto as ‘undisclosed income’ with retrospective effect raises concerns about scrutiny of past transactions. Expanding the definition of VDAs means more digital assets will now be taxed, increasing compliance requirements for businesses and investors. The continued 1% TDS remains a challenge for traders, impacting liquidity," says Punit Agarwal, Founder of KoinX.

The lack of revisions—particularly on the 1% TDS and the inability to offset losses—continues to pose challenges for investors, traders, and industry in the space, says Edul Patel, Founder, Mudrex. Notably, India leads in grassroots crypto adoption, yet the high tax burden has driven many participants to offshore exchanges, reducing transparency and limiting domestic market growth. Patel says a more balanced approach—such as lowering TDS to 0.01% and allowing loss offsets—could have encouraged sustainable participation and innovation. "As digital assets and regulations continue to evolve globally, it is crucial for India to strike the right balance between regulation and growth."

Ashish Singhal, Co-founder of CoinSwitch, agrees that measures aimed at boosting economic growth and providing relief to taxpayers, especially the middle class will stimulate consumer demand and contribute to the overall economic momentum. He also commended the rationalisation of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) thresholds, saying these initiatives reflect a balanced approach to fiscal policy. "We were hopeful the government would take steps to rationalise the tax structure on VDAs, but unfortunately, that has not materialised."

The Union Budget 2025's emphasis on integrating technology across multiple levels of curriculum and education system signals the government wants the future workforce to be better equipped with all the tech knowhows, believes Avinash Shekhar, Co-Founder & CEO, Pi42. But no direction has been provided towards the VDA future, he rues. "Owing to the lack of a clear direction, the country continues to lose significant tech talent from IT hotbeds like Bangalore to more crypto-friendly countries such as Singapore and Dubai."