India’s cryptocurrency sector is ramping up its push for tax reform ahead of the Union Budget 2026, warning that the current crypto tax structure is draining liquidity and pushing traders toward offshore platforms.
Since 2022, crypto investors in India have faced a 30% flat tax on gains along with a 1% TDS on every transaction — a system industry leaders say is hurting market efficiency and innovation.
🟡 Why the Industry Is Concerned
Crypto exchanges and Web3 firms argue that taxing every trade — even when users are not making profits — discourages active trading and reduces market depth. This has made Indian platforms less competitive compared to global exchanges.
“A transaction-based tax system is not aligned with how modern financial markets operate,” said a senior executive from a leading Indian exchange. “It pushes serious traders and capital outside India.”
🔵 Budget 2026 Could Be a Turning Point
With India preparing its February budget, crypto companies are asking policymakers to:
- Reduce the 1% TDS
- Allow loss offsets
- Shift to capital gains–based taxation
They argue that India already has strong compliance systems in place, including KYC, geolocation tracking, and transaction monitoring, which makes heavy transaction taxes unnecessary.
🟢 Government’s View
Tax authorities say crypto’s use of private wallets, DeFi platforms, and offshore exchanges still makes enforcement difficult. The TDS helps track flows and prevent tax evasion — even if it affects liquidity.
However, officials are reportedly reviewing the framework as compliance standards improve.
🔥 Market Impact
If reforms are introduced in Budget 2026:
- Indian exchanges could see higher trading volumes
- Global crypto firms may return to the Indian market
- Retail and institutional participation could rise
Without reform, the industry warns that capital, innovation, and talent will continue moving abroad.
⚠️ Disclaimer:
This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency markets are volatile and regulatory policies may change.
