India's cryptocurrency sector is actively pushing for clear regulatory guidelines and tax reforms as the Union Budget approaches. Industry leaders emphasize the need for rationalizing the existing 1% Tax Deducted at Source on crypto transactions. They believe this change would significantly enhance investor confidence and encourage more domestic participation in the market.
Current Tax Framework Remains Unchanged
The finance minister left the existing tax structure for Virtual Digital Assets untouched in the Union Budget 2025. This decision came despite repeated appeals from industry stakeholders who argue that current rules discourage both investors and traders. India formally recognized cryptocurrencies as Virtual Digital Assets back in Budget 2022, establishing a defined tax regime for the sector.
Under the Income Tax Act, Sections 115BBH and 194S govern the taxation of VDAs including cryptocurrencies, non-fungible tokens, and digital tokens. Gains from these digital assets face a flat 30% tax rate. Additionally, a 1% TDS applies to all transactions. Non-trading income from VDAs is taxed according to an individual's income slab.
Industry Leaders Call for Course Correction
Raj Karkara, Chief Operating Officer at ZebPay, describes Budget 2026 as arriving at a pivotal moment for India's crypto ecosystem. He expresses industry hope for long-awaited regulatory clarity that could bring greater direction and confidence to investors. Karkara stresses that a clear and consistent framework for digital assets would strengthen trust among investors, institutions, and market participants.
"A well-defined framework would enable businesses to operate responsibly within established boundaries," Karkara notes. From a taxation perspective, he advocates rationalizing the current 1% TDS to improve liquidity and encourage stronger onshore participation. He also calls for reviewing the flat 30% tax on VDA gains, suggesting alignment with other asset classes and allowing loss set-offs to create a more balanced investment environment.
"Greater policy clarity could unlock innovation, help India's Web3 ecosystem scale responsibly, and strengthen the country's role in the global crypto economy," Karkara adds.
Refining the Existing Framework
Nischal Shetty, founder of WazirX, views the upcoming budget as a clear opportunity to fine-tune the existing framework. He believes adjustments should support transparency and compliance while fostering innovation. Shetty suggests that lowering transaction-level TDS and permitting loss set-offs could revive onshore liquidity and improve compliance rates.
Shetty highlights that establishing clear reporting rules would boost investor confidence significantly. Such measures would support a sustainable digital asset ecosystem aligned with India's ambitious goal of becoming a $5 trillion economy.
Adopting a 'Make in India' Approach
Pankaj Balani, CEO and co-founder of Delta Exchange, points to India's strong position in global crypto adoption. He emphasizes that this reflects robust grassroots participation from both retail users and sophisticated market participants. Balani argues the upcoming Union Budget presents an opportunity to match this momentum with a clear 'Make in India' approach to the digital assets industry.
Balani stresses the importance of supporting compliant domestic platforms that follow Indian KYC norms, anti-money laundering regulations, capital controls, and data protection rules. He advocates for decisive action against unauthorized entities while clearly differentiating between compliant Indian platforms and non-compliant offshore operators through policy measures.
Seeking Measured Relief After Four Years
Sumit Gupta, co-founder of CoinDCX, notes that the virtual digital asset sector naturally seeks measured relief. This is especially relevant since four years have passed since the current taxation framework was introduced. Gupta believes decisions taken now could meaningfully accelerate innovation and help India emerge as a global leader in Web3 and VDA spaces.
Gupta highlights the need for clear rules and uniform implementation of TDS across all crypto exchanges. He argues this would improve compliance and enhance consumer protection by curbing non-compliant operators effectively.
Strengthening the VDA Ecosystem
SB Seker, Head of APAC at Binance, observes that India's rapid adoption of blockchain and VDAs reflects the scale of its digital economy and growing retail participation. He states that the forthcoming budget presents an opportunity to strengthen the VDA ecosystem through measured regulatory and tax refinements.
"These refinements should protect users, maintain financial stability, and support responsible market development," Seker concludes.
