MUMBAI — India’s 30% flat tax on cryptocurrency profits and 1% transaction levy threaten to throttle domestic software innovation and strand the country’s vast engineering talent pool on the fringes of the global decentralized web, Ethereum co-founder Vitalik Buterin warned in Mumbai.
The policy stifles coders before they start.
Addressing engineers on the sidelines of Devcon, Ethereum’s annual worldwide developer convention hosted in Mumbai, the 32-year-old programmer argued that the rigid tax framework disproportionately punishes early-stage builders experimenting with smart contracts. While New Delhi instituted the 30% tax on virtual asset gains alongside a 1% tax deducted at source (TDS) on every transaction to track capital flows, Buterin said the rules create friction that discourages foundational research and technical trial-and-error at the grassroots level.
To prevent local talent from relocating abroad, Buterin advocated targeted regulatory carve-outs modeled on international tax frameworks. He cited legislative debates in the United States around de minimis exemptions for low-value daily transactions, as well as policies in other jurisdictions that waive taxes entirely on digital assets held for longer than 12 months. Without similar safeguards in India, software architects face cumulative tax liabilities and complex accounting requirements simply for running protocol tests or moving test tokens across smart contracts.
| Tax Mechanism | Current Indian Mandate | Proposed Industry Relief |
|---|---|---|
| Virtual Asset Gains | Flat 30% without loss offset | Long-term capital gains relief after 12 months |
| Transaction Monitoring | 1% TDS on every transfer | De minimis exemption on low-value transactions |
| Compliance Scope | Universal application | Carve-outs for protocol testing and developers |
Yet Buterin maintained that India possesses unique structural advantages to evolve beyond an outsourcing hub for foreign technology firms. Ethereum’s developer base in the country has expanded rapidly, supported by state-backed open-source initiatives and an established engineering ecosystem. Rather than treating distributed networks solely as trading instruments, Buterin underscored direct opportunities to integrate blockchain infrastructure with India's digital public infrastructure, particularly the Unified Payments Interface (UPI) and citizen verification services.
"There is a lot of excitement from people who want to build open technology, both inside Ethereum and outside, and we wanted to engage with that," Buterin said, explaining why organizers selected Mumbai to host Devcon. Software builders and blockchain advocacy groups now look toward upcoming Union Budget consultations to gauge whether the Finance Ministry will review the 1% TDS threshold and clarify rules for open-source development environments.