Crypto Taxes vs Equity Taxes in India: Which One’s More Investor-Friendly?

The Indian investment landscape has diversified significantly over the past decade. While equities have long been a favorite among traditional investors, the rise of cryptos has introduced a new asset class that’s turning heads—especially among younger investors. But when it comes to taxation, which investment route offers a better deal for investors—crypto or equities?

Let’s dive into a detailed comparison to understand the tax implications of both investment avenues and find out which is more investor-friendly in India.

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Crypto Taxation in India

Crypto assets, NFTs, and other Virtual Digital Assets (VDAs) are taxed under a strict regime introduced in the 2022 Union Budget. Here are the key highlights:

Flat 30% Tax: Gains from the transfer of VDAs are taxed at a flat rate of 30%, regardless of the holding period.

No Deductions Allowed: Investors can’t claim any deductions for expenses or losses—except for the cost of acquisition.

No Loss Set-Off: Losses from crypto trades cannot be set off against any other income—whether from crypto or other heads.

1% TDS on Transactions: A 1% Tax Deducted at Source (TDS) is applied on the sale consideration if annual transactions exceed ₹50,000 (₹10,000 in some cases).

Airdrops & Mining Income: Taxed as "income from other sources", with subsequent gains also attracting 30% tax.

The crypto tax framework is strict, inflexible, and offers no reliefs or set-offs, making it relatively harsh for active traders and long-term investors alike.

Equity Taxation in India

Equity investments are treated more favorably under the Indian tax regime, encouraging long-term wealth creation.

How Equity Taxes work?

Short-Term Capital Gains (STCG): Profits from listed shares held for less than 12 months are taxed at 20%.

Long-Term Capital Gains (LTCG): Profits from shares held for more than 12 months are taxed at 12.5%, but only if the gains exceed ₹1.25 lakh per financial year.

The annual cap on the exemption of long-term capital gains from the transfer of equity shares, equity-oriented units, or business trust units has been raised from Rs. 1 lakh to Rs. 1.25 lakh for the benefit of the lower and middle classes.  Nevertheless, the tax rate has gone up from 10% to 12.5%.  While the tax rate changed on July 23, 2024, the exemption amount was raised to Rs. 1.25 lakhs for the entire year.

Set-Off & Carry Forward of Losses

• STCG and LTCG losses can be set off against gains of the same nature.
• Unused capital losses can be carried forward for 8 years.
• Dividend Income: Taxed as per individual slab rates.

The equity taxation system is more lenient, structured, and encourages long-term investing through lower tax rates and the ability to adjust losses. Whereas crypto losses cannot be carried forward or set off against any other income as per current Indian tax laws.

Crypto vs Equity: Taxation Comparison Table

Which Is More Investor-Friendly?

Clearly, when it comes to taxation, equities win the race:

1. Benefit from lower tax rates, threshold exemptions, and tax planning flexibility.

2. The ability to set off and carry forward losses makes equities more efficient for active traders and long-term investors.

3. The absence of TDS in equities ensures better cash flow for investors.

4. On the other hand, the crypto tax structure is still in its infancy, designed more to regulate than to incentivize.

Final Thoughts

While cryptocurrencies represent the future of digital finance, the current tax framework in India favors equity investments. For retail investors looking for long-term wealth creation, equities provide a tax-efficient and transparent investment route.

However, as the crypto ecosystem matures and regulations evolve, we might see more favorable tax treatment in the future. Until then, equity markets remain the most investor-friendly destination from a taxation point of view.