Budget 2026: Crypto Industry seeks tax relief, clear regulatory road map

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026 on February 1, India’s crypto and Web3 industry is once again looking to North Block for meaningful reforms, four years after the country rolled out one of the world’s most stringent tax regimes for virtual digital assets (VDAs).

In the Union Budget 2022, the government introduced a specific and comprehensive framework for taxing cryptocurrencies. Subsequent budgets in 2023 and 2024, however, largely maintained the status quo, despite repeated industry appeals for relief. The Budget proposal in 2025 further tightened compliance by expanding the definition of VDAs and mandating transaction reporting by specified entities from April 1, 2026, while leaving the core tax structure unchanged.

The Budget 2022 framework classified cryptocurrencies as VDAs and subjected them to a flat 30% tax on gains, disallowed loss set-offs and most deductions, and introduced a 1% tax deducted at source (TDS) on transactions to improve traceability. While the move brought regulatory clarity, it also led to a sharp decline in onshore trading volumes and accelerated user migration to offshore platforms.

Now, with global crypto regulations maturing and India ranking among the world’s largest digital asset adoption markets, industry leaders say Budget 2026 presents a critical opportunity to recalibrate policy without compromising regulatory oversight.

Call for rationalised taxation, onshore liquidity

A common demand among crypto industry stakeholders is to reduce transaction-level friction caused by the 1% TDS and introduce pragmatic reforms that encourage users to return to compliant platforms while strengthening regulatory oversight.

Sumit Gupta, Co-founder of CoinDCX, said the current framework has completed its initial purpose and now needs fine-tuning. “Reducing TDS from 1% to 0.01% would retain monitoring while removing the primary incentive for offshore migration. It would encourage users to return to Indian platforms and restore transaction visibility under government oversight,” he said.

Gupta added that aligning the 30% capital gains tax with income tax slabs and allowing loss offsetting would help build a stable, future-ready ecosystem.

Nischal Shetty, Founder of WazirX, echoed similar views, noting that Web3 adoption and institutional participation have evolved significantly since 2022.

“A calibrated reduction in TDS and a review of loss set-off provisions could help restore onshore liquidity, improve compliance, and ensure that more economic activity remains within India’s regulated perimeter,” Shetty said, adding that clear guidelines on permissible activities and reporting obligations would strengthen investor confidence.

ZebPay COO Raj Karkara said rationalising the tax structure could improve predictability for investors and institutions alike.

“A review of the flat 30% tax on VDA gains, aligned with other asset classes and allowing loss set-offs, would create a more balanced investment environment and encourage stronger onshore participation,” he said.

Regulatory clarity key for innovation

Beyond taxation, industry executives are seeking clearer operating rules to support responsible innovation. Avinash Shekhar, Co-founder and CEO of Pi42, said Budget 2026 could signal India’s transition from an evolving regulatory phase to global leadership in digital assets.

“Clear and forward-looking regulatory direction can help deepen onshore activity, improve transparency, and strengthen compliance across the ecosystem. A balanced policy framework would support more sustainable market behaviour while encouraging responsible participation on regulated platforms,” he said.

Ashish Singhal, Co-founder of CoinSwitch, highlighted the disproportionate impact of the current framework on retail investors.

“Taxing transactions without recognising losses creates friction rather than fairness. Reducing TDS to 0.01% and raising the threshold to ₹5 lakh would protect small investors while preserving traceability,” Singhal said, adding that stronger FIU oversight now allows room to revisit the framework.

Global players are also watching closely. SB Seker, Head of APAC at Binance, said India could benefit from shifting towards a more holistic licensing-and-supervision model.

“A pragmatic framework focused on realised capital gains, limited loss set-offs, and moving away from transaction-level levies could improve fairness for retail participants and encourage responsible capital investment,” he said.

Crypto performance in 2025

The cryptocurrency market endured a turbulent year in 2025, reflecting its inherent volatility. Global crypto market capitalisation surged to a peak of $4.20 trillion in October before sliding to a low of $2.96 trillion in December. Bitcoin led the market’s swings, crossing the $100,000 mark early in the year and scaling multiple record highs before a sharp correction in the final quarter dented investor sentiment. Ethereum lagged Bitcoin’s performance, ending the year down over 20%, while most altcoins followed a similar pattern of sharp rallies and abrupt pullbacks.

With enhanced anti-money laundering (AML) measures already introduced by the Financial Intelligence Unit (FIU-IND) and multiple exchanges operating as FIU-registered entities, the industry believes compliance infrastructure is now robust enough to support reform. Market participants say the upcoming Economic Survey could offer early cues on the government’s thinking around digital assets.

As India pushes towards its $5 trillion economy ambition, crypto and Web3 leaders argue that a balanced, transparent, and growth-oriented policy in Budget 2026 could help convert high adoption into durable economic value, while keeping innovation firmly within the regulated perimeter.

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