An argument has been made by a legal practitioner that the crypto tax imposed by the Indian government is a drastic measure aimed at undermining blockchain and crypto technology. The government holds the belief that these technologies are predominantly used for illegal activities such as money laundering and financing terrorism.
During the Peer-to-Peer Financial Systems Workshop in 2024, Amit Kumar Gupta, a legal practitioner at the Supreme Court of India and the Indian Institute of Technology-Kanpur, presented a research paper on the subject of crypto taxation in India. Gupta stated that the crypto and blockchain sector in India is heavily burdened with taxes but lacks proper regulation. In an interview with Cointelegraph, Gupta explained that this situation arises from a lack of understanding among Indian regulators regarding the true potential and applications of Web3 technologies.
India’s crypto law, which mandates a 30% tax on citizens, came into effect on April 1, 2022. Gupta emphasized that this tax applies to profits and individuals are not allowed to offset their losses. Moreover, users are also subject to a tax for every crypto transaction they make.
Gupta criticized the taxation system, describing it as “draconian,” and believes that it stems from a lack of comprehension among government officials regarding the technology. In Gupta’s view, the purpose of the tax is to discourage people from utilizing crypto. He stated that the Indian government perceives crypto as being “worse than gambling.” Furthermore, Gupta predicts that India’s tax system will drive crypto entrepreneurs out of the country and towards jurisdictions with clearer regulations.
Despite the uncertainty surrounding regulations in India, tech startups continue to work on Web3 projects within the country. Rohit Mohan, the CEO of India-based Web3 marketing firm NC Global Media, stated that while India remains cautious about cryptocurrencies, its developers are actively driving innovation. Mohan emphasized the importance of collaboration and user education in this context.