The Union Budget 2026 draws closer and India’s cryptocurrency and Web3 industry is looking for clearer regulations and a more balanced tax framework for Virtual Digital Assets (VDAs). Industry leaders believe the next Budget is a critical moment to correct policies that have restricted domestic growth and driven users toward offshore platforms.

Recent Compliance Moves Signal Progress, but Gaps Remain

Earlier this month, the Financial Intelligence Unit (FIU)-India released updated Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) guidelines for VDA service providers. 

These changes aim to strengthen monitoring and contain illegal activity across crypto platforms.

Although the industry broadly welcomes the move, it believes compliance alone is insufficient without clearer operating rules and tax reforms. 

Market participants argue that ambiguity in regulations, coupled with a rigid tax structure, continues to discourage onshore participation despite India’s strong crypto adoption.

Tax Framework Under Scrutiny Since Budget 2022

India recognised cryptocurrencies as Virtual Digital Assets (VDAs) in the 2022 Union Budget, when finance minister Nirmala Sitharaman said that a 30% tax would be applied to all VDA gains, and every transaction would be subject to a 1% Tax Deducted at Source (TDS). 

The structure, regulated by Income Tax Act sections 115BBH and 194S, has not changed since.

According to CoinDCX co-founder Sumit Gupta, the industry is now seeking “measured relief” after four years under the same regime. 

He notes that reducing TDS from 1% to 0.01% would preserve transaction tracking while removing the incentive for traders to shift activity to foreign exchanges. 

Gupta also advocates aligning the 30% tax with income tax slabs and allowing loss set-offs to create a more practical and compliant ecosystem.

Offshore Migration Raises Economic and Regulatory Concerns

Delta Exchange's Chief Executive Officer, Pankaj Balani, estimates that Indian customers generated around Rs. 5 lakh crore of trading volume for foreign exchanges from October 2024 to October 2025.

Balani warns that when platforms operate outside Indian jurisdiction, regulatory oversight weakens, consumer grievance mechanisms become ineffective, and economic value flows abroad. 

He argues that it is necessary to have a regulatory framework that distinguishes clearly between authorised domestic ventures and prohibited foreign ones.

Also Read: How to Stay Safe from Cryptocurrency Scams in 2026

Industry Calls for a Shift in Regulatory Approach

The head of Binance for the APAC region, SB Seker, suggests moving away from the transaction-level fees and instead introducing a capital-gains-focused tax regime, allowing for limited loss set-offs to make the system fairer for retail investors.

Similarly, ZebPay COO Raj Karkara and WazirX founder Nischal Shetty believe that clearer reporting norms, lower TDS rates, and tax rationalisation could bring back onshore liquidity and make the investors confident again.