• CBDT begins talks with crypto industry on need for a separate law for virtual digital assets (VDAs).
• Concerns raised over high taxation, lack of banking access, and unclear rules under FEMA.
• Industry voices push for fairer tax rules, especially on 1% TDS and loss offsetting.

The Central Board of Direct Taxes (CBDT) has started discussions with stakeholders from India’s cryptocurrency sector to assess whether the country needs a dedicated law for virtual digital assets (VDAs). This comes as the crypto industry continues to face uncertainty around tax rules, banking access, and foreign exchange regulations.

Currently, gains from trading or investing in cryptocurrencies are taxed at a flat rate of 30%, with no provision to offset losses from one crypto asset against another. Additionally, a 1% tax deducted at source (TDS) applies to every transaction, which many in the industry argue discourages active trading.

Another key concern is the lack of support from banks. Many financial institutions are still hesitant to provide services for crypto transactions due to the Reserve Bank of India’s past cautionary stance. Furthermore, there is no clear guidance under the Foreign Exchange Management Act (FEMA) on whether Indians can legally use offshore crypto exchanges.

During the consultation, the CBDT reportedly asked platforms whether the current 1% TDS was too high and if traders should be allowed to offset losses to make the tax system more balanced.

Also Read: Bitcoin Smashes Record as U.S. Opens Doors to Crypto

While India has not banned cryptocurrencies, regulation so far has focused mainly on taxation and compliance. Industry players have called for a comprehensive legal framework to encourage innovation and reduce the shift of trading volumes to international platforms.

Meanwhile, global trends show growing clarity in crypto regulation, with the EU’s MiCA and ongoing discussions in the US pointing the way forward.