NEW DELHI: As the countdown to the Union Budget 2026-27 begins, India’s cryptocurrency sector finds itself at a critical juncture. It has been nearly four years since the government introduced the controversial taxation framework in 2022—levying a flat 30% tax on gains and a 1% Tax Deducted at Source (TDS) on transactions. According to the Bharat Web3 Association (BWA), these measures have “decimated” domestic trading volumes by over 80%, pushing Indian users toward non-compliant offshore platforms.
The Core Demands for 2026 Industry leaders, including CoinDCX and CoinSwitch, are not asking for a complete waiver but for “rationalization.” The primary demands include:
- TDS Reduction: Slashing the TDS from 1% to 0.01%. The industry argues that 1% sucks liquidity out of the market, making high-frequency trading impossible. A lower rate would still serve the government’s goal of tracking transactions without killing the market.
- Loss Set-off: Currently, crypto investors cannot offset losses from one asset (e.g., Bitcoin) against profits from another (e.g., Ethereum). The industry wants this aligned with equity markets, where such set-offs are standard.
- Income Tax Slabs: Reclassifying Virtual Digital Assets (VDAs) to be taxed as per income slabs rather than a flat 30% “sin tax” similar to gambling.
“Regulatory Visibility is Lost” Dilip Chenoy, Chairman of BWA, highlighted a counter-intuitive outcome of the current high tax regime. “By pushing users to offshore exchanges that don’t deduct TDS, the government has actually reduced its visibility over transactions,” he noted. With the US passing the stablecoin-focused “Genius Act” in 2025 and a global crypto rally underway, Indian startups fear being left behind if the 2026 Budget doesn’t offer relief.
