COURTKUTCHEHRY SPECIAL ON INDIA’s CRYPTO INDUSTRY DEMAND FOR FAIR TAX RULES
Budget 2026: Crypto Industry Seeks Fair Tax Rules to Boost India’s Digital Asset Ecosystem
Players call for rationalisation of 30% tax and 1% TDS to stop capital flight to foreign exchanges
Industry urges clarity, balanced regulation, and level playing field for domestic crypto platforms
By Our Business Reporter
New Delhi: January 19, 2026:
As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026 on February 1, India’s cryptocurrency industry has renewed calls for a more balanced and transparent taxation framework. Stakeholders argue that the current tax regime—30% tax on profits from Virtual Digital Assets (VDAs) and 1% Tax Deducted at Source (TDS) on every transaction—is driving investors away from Indian exchanges and into foreign platforms.
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With India ranking among the world’s top markets for crypto adoption, industry leaders believe Budget 2026 offers a crucial opportunity to level the playing field, encourage innovation, and prevent capital flight.
Current Tax Rules and Challenges
- 30% tax on gains: Introduced in 2022, profits from crypto trades are taxed at a flat 30%, with no deductions allowed for expenses or losses.
- 1% TDS on transactions: Every crypto transaction attracts a 1% TDS, regardless of profitability.
- No set-off of losses: Investors cannot offset losses against gains, unlike in equity markets.
- Impact: These rules have reduced liquidity on Indian exchanges, discouraged retail participation, and pushed trading volumes offshore.
Industry players argue that such restrictive measures are counterproductive, as they penalize genuine investors while failing to curb speculative activity.
Industry Demands Ahead of Budget 2026
Crypto stakeholders have outlined several key demands:
- Rationalisation of TDS: Reduce the 1% TDS to a more practical level (0.01–0.1%) to improve liquidity.
- Allow set-off of losses: Permit investors to balance profits against losses, like equity taxation.
- Clear regulatory roadmap: Provide guidelines for exchanges, custodians, and investors to ensure compliance with KYC and anti-money laundering norms.
- Level playing field: Align crypto taxation with other asset classes to prevent discrimination.
- Encourage innovation: Support blockchain and Web3 startups by easing tax burdens and offering incentives.
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Why the Industry is Concerned
- Capital flight: High taxes and TDS are pushing Indian investors to foreign exchanges, draining liquidity from domestic platforms.
- Innovation at risk: Startups in blockchain and Web3 face uncertainty, limiting India’s potential as a global hub.
- Retail investors hit: Small traders bear the brunt of restrictive rules, discouraging participation.
- Global competitiveness: Other countries are offering friendlier tax regimes, making India less attractive for crypto businesses.
Expert Views
- Abhay Agarwal, Getbit founder: India has over 100 million crypto users; Budget 2026 must strengthen the ecosystem with fair taxes.
- SB Seker, Binance APAC head: India’s rapid adoption of blockchain shows potential, but restrictive taxes risk pushing innovation offshore.
- Industry consensus: A balanced framework can ensure compliance while supporting growth.
Broader Implications
- For government: Rationalising taxes could increase compliance and revenue by keeping trading onshore.
- For investors: Fair rules would encourage participation and reduce reliance on foreign platforms.
- For economy: Supporting crypto innovation could boost India’s digital economy and job creation.
- For regulation: Clear guidelines would strengthen oversight without stifling growth.
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Conclusion
The upcoming Union Budget 2026 is a pivotal moment for India’s crypto industry. By rationalising the 30% tax and 1% TDS, allowing loss setoffs, and providing a clear regulatory roadmap, the government can ensure that India remains a leader in the global digital asset economy.
Industry players stress that the goal is not to avoid taxation but to create a fair, transparent, and growth-oriented framework. As India balances innovation with regulation, Budget 2026 could mark the beginning of a more sustainable era for cryptocurrencies in the country.
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