As countries like Thailand, Indonesia, and Germany revise crypto taxation to support innovation, India’s rigid tax regime faces renewed scrutiny ahead of Union Budget 2026.
New Delhi: In a landmark decision, Thailand has introduced a five-year capital gains tax holiday on crypto-asset transactions, starting January 1, 2025. The exemption — available only for trades made via government-registered exchanges — replaces the earlier system where tax rates went as high as 35%. The policy seeks to channel crypto activity into the formal sector, protect investors, and discourage reliance on offshore exchanges.
It is not that Thailand is the first country to do so. Indonesia on the other hand imposes a capital gains tax of 0.21% on trades made through domestic exchanges. For trades conducted on international exchanges the tax is 1%, encouraging investors to trade using domestic exchanges.
In addition to these examples, there are others that impose no capital gains tax on profits from crypto-assets for individual investors. For instance, Singapore, Malaysia, and the UAE impose no such taxes. In Germany and Portugal, investors are not taxed if they hold their crypto-assets for more than a year. Even the countries that don’t exempt capital gains tax, such as Brazil, have opted for a progressive tax rates ranging from 15% to 22.5% depending on the capital gains. Additionally, Brazil allows investors to offset losses and also carry them forward. These examples clearly illustrate that countries across the world are experimenting with differentiated tax regimes for crypto. Additionally, many countries are enacting crypto-specific legislation to ensure the risks associated with them are mitigated. By doing so, these countries are trying to protect investors and users; but at the same time, they are not stifling innovation or pushing crypto trades offshore with harsh taxes.
On the other hand, India has imposed a flat 30% capital gains tax on proceeds from the sale of crypto-assets which is unique in both being a specialized rate as well as one of the highest in the world. On top of that, the taxation framework does not allow investors from offsetting or carrying forward losses. Furthermore, unlike many other countries, every single trade in India attracts a 1% tax deducted at source (TDS), whether investors make a profit or not. More importantly, these rules do not make any distinction between trades done through compliant domestic platforms or done through foreign companies, those that do not have any physical presence or employees in the country. These rules came into effect in 2022 and have since contributed to the fall in volumes on Indian crypto-exchanges. Reports by independent think tanks have pointed out that more than 90% of crypto volumes have moved to offshore exchanges to avoid such steep tax rates as they do not report data to Indian authorities.
It is also important to note that the Government of India introduced guidelines for crypto service providers under PMLA rules in 2023 wherein reporting of data had been mandated. However, many such exchanges still have not registered with Indian authorities. A few days back, FIU-India issued 2nd round of show cause notices to 25 such players, the first such action took place way back in December 2023. Even among the registered service providers, many do not follow the taxation framework as mandated by the law. Ironically, the taxation framework which was introduced to disenchant crypto investors has only resulted in pushing them towards riskier unregulated offshore exchanges.
To this end, Thailand’s approach can be particularly useful for India. By exempting or reducing taxes when trading happens through locally licensed exchanges, can play a big role in drawing users back to domestic exchanges. This will only help the government in improving the monitoring of the sector and getting the required data for taxation purposes. For consumers, this would result in a less risky way to invest in crypto assets and would also reduce their chances of interaction with illicit actors mostly present on unregistered foreign exchanges.
The Indian taxation framework was introduced in the Union Budget of 2022 and the framework has now completed almost 4 years. The data evidence present suggests that the intended results were not achieved through this framework. Moreover, India not only has a strong user interest in crypto but also a strong developer ecosystem and entrepreneurial talent within the crypto-assets sector. The upcoming Union Budget 2026 presents a good opportunity for the government to study the relevant changes happening all around the world and amend the existing taxation policies in a way that continues to benefit the country and protect the users.
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