Foreign media: India’s crypto industry may see a more balanced regulatory framework in the coming years, but the first element likely to be reevaluated may not be the 30% tax on crypto gains, but rather the 1% TDS on each transaction. Abhay Agarwal, founder of GetBit, told Coinpedia that this arrangement functions more like a direct tax on liquidity.
1% TDS is accused of suppressing local liquidity
Abhay believes that although a 30% capital gains tax is high, the 1% TDS deducted on every transaction has a greater negative impact on market activity. For market makers and high-frequency participants, this significantly increases trading costs and reduces the efficiency of matching buyers and sellers.
He stated that this system was helpful for regulators in tracking industry activities during its early stages, but as regulatory visibility increases and the industry matures, there is room for reassessing the tax structure. According to his assessment, a reduction in TDS could be one of the earliest policy changes to occur within the next two to four years.
Trading activity shifts to offshore platforms.
This opinion piece states that the immediate consequence of the 1% TDS is a shift in liquidity from Indian platforms to overseas exchanges. Abhay argues that capital typically flows toward markets with lower costs and higher execution efficiency; when trading friction in a single jurisdiction rises significantly, users naturally migrate.
He also noted that liquidity outflow is not just about declining trading volumes but also affects the concentration of developers, entrepreneurs, capital, and service providers. India continues to export talent in the digital assets space, but some innovation activities have shifted beyond the scope of domestic regulation.
- 30%: Current cryptocurrency gains tax rate in India
- 1%: TDS applicable on each cryptocurrency transaction
- 2 to 4 years: The anticipated time window for potential adjustments
The Rupee stablecoin is considered an extension of payment systems.
On stablecoins, Abhay defines them as an entry point to digital assets, emphasizing their primary value lies in payments and settlement rather than replacing Bitcoin’s store-of-value function. He notes that stablecoins enable faster transfers, lower costs, and access to the global dollar system via mobile devices.
Regarding the rupee stablecoin, he believes that, if properly designed, it could expand the use of the rupee in cross-border payments and trade settlement. The logic is that India has already established a digital payment advantage through UPI; extending this capability to on-chain settlement could lead to faster clearing and lower transaction costs.
However, the article also notes that whether the rupee can gain broader international demand ultimately depends on broader economic conditions, including trade relationships and external market confidence in the currency.
Regulatory clarity has been designated as a top priority.
Abhay believes that over the next two to three years, Indian policymakers most need to address regulatory clarity. Businesses can adapt to strict regulation, but struggle to allocate resources in an environment of long-term uncertainty.
He also argued that Bitcoin should be viewed separately from other digital assets, as it has no issuer, no centralized management team, and a relatively fixed monetary policy. According to him, if the regulatory environment becomes more stable, India could expand its involvement in areas such as Bitcoin custody, payments, infrastructure, and even mining, while keeping more innovation within its domestic compliant framework.