With the Union Budget fast approaching in February, CoinSwitch, a leading cryptocurrency platform, has released a comprehensive survey offering insights into Indian investors’ sentiments on the taxation and regulation of cryptocurrencies, also referred to as Virtual Digital Assets (VDAs). The survey, which captures a broad spectrum of investor perspectives, highlights a strong awareness of India’s current crypto taxation system, alongside significant dissatisfaction regarding its perceived fairness.
Awareness of Crypto Taxation Framework Soars
The CoinSwitch survey reveals that nearly 90% of respondents are well-versed with key provisions of India’s current crypto taxation framework. These provisions include a 30% tax on gains, the lack of loss set-off or carry-forward, and a 1% tax deducted at source (TDS) on transactions. While awareness of the regulations is high, many investors feel the tax structure is overly burdensome and unfair. A substantial 66% of respondents expressed concerns about the current framework, citing it as unjust, with many calling for reforms to improve the investment landscape.
Ashish Singhal, Co-founder of CoinSwitch, commented on the findings: “The survey shows that investors are not seeking tax exemptions, but rationalisation. They are asking for lower tax rates, loss set-off provisions, reduced TDS, and a more predictable regulatory environment in line with established financial markets. The survey suggests that investors are ready to comply, but they need clearer and fairer regulations.”
Impact of Taxation on Market Behavior
The CoinSwitch survey also sheds light on how the current tax regime is influencing investor behavior. Approximately 59% of respondents revealed they have reduced their participation in crypto trading or investing due to the high taxes. This shift in investor behavior raises concerns about the long-term effects of taxation on market activity, including potential reductions in trading volumes, liquidity, and overall participation in India’s onshore cryptocurrency market.
Interestingly, 17% of respondents reported an increase in crypto participation despite the tax structure, while 16% stated that the tax regime had no impact on their activity. These findings suggest that some investors, particularly those with a longer-term outlook, may prioritize regulatory certainty over short-term tax consequences.
Calls for Integration into Mainstream Financial System
The survey also highlights a strong preference among Indian cryptocurrency investors for the integration of digital assets into India’s mainstream financial system. Over 60% of respondents indicated that they would prefer cryptocurrencies to be taxed in the same manner as equities or mutual funds. Only 17% of respondents preferred a separate tax structure for crypto. This indicates a desire for consistency and alignment with traditional financial instruments, which could foster greater trust and mainstream acceptance.
The Need for Comprehensive Regulatory Clarity
Beyond tax reforms, the survey reveals a widespread demand for clearer and more comprehensive regulations. A significant 80% of respondents emphasized the importance of clear regulations, with 60% rating it as extremely important for the long-term stability and growth of the crypto market in India. These findings underline that tax reform alone is not enough to build investor confidence—regulatory clarity is crucial to ensuring a transparent, well-regulated ecosystem for virtual digital assets.
“Clear regulation is critical for enabling investor confidence and fostering long-term growth in the sector,” Singhal added. “As India continues to explore how to integrate cryptocurrency within its financial system, it is essential to provide a framework that aligns with both market realities and investor expectations.”
A Positive Outlook on Crypto as an Asset Class
Despite the challenges presented by the current tax regime, the overall sentiment towards cryptocurrencies remains positive. A majority of respondents, 51%, believe that cryptocurrency should be encouraged as a new asset class in India. This optimism suggests that investors are hopeful for an improved regulatory environment that can support the sustainable growth of digital assets in the country.
The findings from this CoinSwitch survey serve as a valuable input for policymakers, especially as the Union Budget draws near. The data suggests that investors are ready for more predictable, market-aligned taxation and regulation that can enable the growth of the digital asset ecosystem while protecting the interests of participants.
As India moves towards regulatory clarity, the future of the cryptocurrency space looks increasingly dependent on how well the government addresses investor concerns over fairness and transparency in taxation.
Key Takeaways:
- Nearly 90% of Indian crypto investors are aware of the current taxation framework.
- 66% of respondents view the current tax structure as unfair.
- 59% of investors have reduced participation due to the high tax rates.
- 61% believe crypto should be taxed similarly to equities or mutual funds.
- 80% emphasize the importance of regulatory clarity to boost investor confidence.
- 51% support the encouragement of crypto as a new asset class.
With the crypto landscape evolving rapidly, the CoinSwitch survey highlights an urgent call for regulatory reform that can cater to the growing investor base in India while balancing market dynamics and fiscal policy.
