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India’s crypto industry is pressing the government to revisit crypto taxes ahead of the Union Budget 2026-27. Executives want relief from the 1% transaction-level tax deducted at source (TDS) and the 30% fee through virtual digital asset (VDA) gains tax.
Industry leaders say the rules improved traceability. However, they also say the regime has drained onshore liquidity. They argue it has pushed Indian traders toward foreign exchanges, reducing local oversight.
Senior executives from WazirX and Delta Exchange say the 1% TDS applies to every crypto trade. They argue it blocks working capital when users trade often. Consequently, they say domestic volumes and market depth weaken.
They also highlight the 30% flat tax on gains. The framework does not allow loss set-off, so losses cannot offset profits for tax purposes. Executives say this structure raises the effective cost of trading.
Estimates in the industry narrative also suggest Indian users generated nearly Rs. 5 lakh crores in volume on overseas exchanges between October 2024 and October 2025. Leaders link that offshore shift to lower friction outside India.
India formally recognised VDAs in the Union Budget 2022–23. Finance minister Nirmala Sitharaman announced a 30% tax on income from VDA transfers. She also introduced 1% TDS above a monetary threshold.
The Union Budget 2025 left both rates unchanged. However, it expanded monitoring of crypto activity through new reporting obligations.
The Finance Bill introduced Section 285BAA. It requires reporting entities to furnish information on crypto-asset transactions. Exchanges, wallet providers, and intermediaries fall under that reporting framework.
Lawmakers also widened the VDA definition under Section 2(47A). The expanded scope includes assets based on cryptographically secured distributed ledger technology. It is intended to cover DeFi applications, selected NFTs, and newer token structures.
Budget 2025 also brought undisclosed VDAs into search and seizure provisions. From February 1, 2025, undisclosed crypto found in a tax search faces an effective 60% levy, including surcharge and penalty.
Also Read: India Sends Over 44,000 Notices to Crypto Traders Amid Growing Tax Evasion Concerns
WazirX founder Nischal Shetty said Budget 2026 offers a chance to “fine-tune” the framework. He framed the goal as transparency and compliance, while supporting innovation.
Delta Exchange CEO Pankaj Balani cautioned against growing reliance on foreign trading platforms. He said overseas activity can weaken consumer safeguards and threaten domestic jobs. He also warned that offshore migration can reduce India’s potential tax collections, and he urged a “Make in India” approach that strengthens local exchanges.
Regulators have also tightened oversight of crypto platforms. The Financial Intelligence Unit (FIU) now requires live identity verification and enhanced client due diligence to reduce illicit activity.
Meanwhile, the Income Tax Department told parliament that crypto’s pseudonymous design and rapid transaction flows can complicate tax enforcement. Industry executives say targeted tax changes could keep more trading within India’s regulated ecosystem without undermining compliance.
India’s adoption remains strong. Chainalysis said India leads global crypto adoption, supported by grassroots participation and a strong digital payments system, including the Unified Payments Interface (UPI) and eRupi.
Chainalysis also said on-chain value received in India rose 99% between July 2024 and June 2025, versus the prior year. The country also ranked first across sub-indices in the 2025 Global Crypto Adoption Index.
Tax experts have flagged unresolved issues in crypto taxation. Experts say key tax issues remain unresolved, including how losses should be treated, how cross-category trades should be handled, and how cost basis should be calculated. They also want clearer rules on whether crypto income falls under capital gains or another tax head.
The Union Budget 2026 will set the next direction for India’s crypto policy. With expanded reporting due from April 1, 2026 the sector is looking for measures that boost onshore liquidity while maintaining strong oversight.
