A nationwide survey by CoinSwitch has revealed significant investor sentiment regarding cryptocurrency taxation in India, with findings released ahead of the February 1 Union Budget. The comprehensive study captures investor preferences on the taxation and regulation of Virtual Digital Assets (VDAs) in the country.

Investor Preferences on Taxation Framework

The survey demonstrates a clear preference for integrating cryptocurrency taxation into India's mainstream financial framework. The findings show that investors favour treatment aligned with established financial instruments rather than the current standalone approach.

Current Tax Structure Awareness and Concerns

Despite widespread awareness of existing provisions, investor sentiment regarding the current framework remains largely negative. Nearly 90% of respondents demonstrated familiarity with key aspects of the current tax regime, including the 30% tax on gains, absence of loss set-off or carry-forward provisions, and the 1% Tax Deducted at Source (TDS) on transactions.

However, 66% of respondents believe the current crypto tax structure is unfair, indicating significant dissatisfaction with the existing framework despite high awareness levels.

Impact on Market Participation

The current taxation regime appears to be significantly influencing investor behaviour and market participation patterns. The survey reveals varying responses to the existing tax structure among different investor segments.

The majority reporting reduced participation suggests potential implications for trading volumes, liquidity, and onshore market activity. Conversely, segments showing stable or increased participation indicate some investors are adopting longer-term investment approaches, prioritizing regulatory certainty over short-term tax considerations.

Industry Perspective and Regulatory Expectations

Ashish Singhal, Co-founder of CoinSwitch, emphasized that investors are seeking rationalization rather than exemptions. "The survey shows that investors are not seeking tax exemptions, but rationalisation. Respondents favour lower tax rates, loss set-off provisions, reduced TDS, and clearer regulations aligned with established financial markets," Singhal stated.

He added that the findings indicate investors are informed, willing to comply, and seeking a fair and predictable framework. Singhal noted that rationalizing crypto taxation and providing regulatory clarity could support compliant onshore participation and contribute to a more transparent digital asset ecosystem.

Information Sources and Regulatory Clarity

The survey identified primary information sources used by crypto investors for updates on taxation and regulation:

• Crypto platforms and exchanges: 30%
• News media: 27%
• Social media: 25%
• Other sources: 18%

Beyond taxation concerns, the survey highlights the critical importance of broader regulatory clarity. Over 80% of respondents consider clear regulation important, with 60% rating it as extremely important. This underscores the view that tax reform alone is insufficient to build long-term investor confidence.

Policy Sentiment and Future Outlook

Overall policy sentiment captured in the survey leans towards enablement of the cryptocurrency sector in India. The findings reveal a generally positive outlook among investors regarding the future of crypto as an asset class.

The survey results suggest that while investors acknowledge the need for regulation, they favour an approach that encourages growth and innovation in the digital asset space rather than restrictive measures.