As India approaches the Union Budget 2026, the country’s cryptocurrency industry has stepped forward with a unified and urgent demand: clear regulation and meaningful tax reform. Exchange operators, blockchain entrepreneurs, investors, and Web3 startups now look to the government for decisive action that can unlock growth instead of suppressing it. Their message remains consistent across the ecosystem—India needs policy clarity, not ambiguity, and balanced taxation, not punitive measures.
Over the past several years, India has emerged as one of the largest crypto-adopting nations in the world. Millions of users trade, invest, build applications, and explore blockchain-based products. Despite this massive participation, policymakers have not delivered a comprehensive regulatory framework. This gap between adoption and regulation has created uncertainty that affects businesses and individuals alike.
A Growing Market Held Back by Uncertainty
India’s crypto sector has grown rapidly due to widespread smartphone access, a strong digital payments culture, and a young population eager to explore new technologies. Developers continue to build decentralized applications, blockchain infrastructure, and financial tools with global relevance. However, unclear rules limit the sector’s ability to scale responsibly within the country.
Businesses struggle to plan long-term strategies without knowing how regulators classify cryptocurrencies. Investors hesitate to allocate capital when laws lack precision. Startups face challenges when they attempt to open bank accounts, attract institutional funding, or expand operations. This uncertainty discourages innovation and drives talent toward more predictable jurisdictions.
Industry leaders argue that clarity does not mean unchecked freedom. They call for defined rules that recognize crypto as a legitimate digital asset class while enforcing strong consumer protection and compliance standards.
The Burden of the Current Tax Regime
Taxation stands at the center of the industry’s concerns. The government introduced a special tax framework for virtual digital assets that includes a flat 30 percent tax on profits and a one percent tax deducted at source on every transaction. While authorities designed these measures to improve tracking and revenue collection, the market has felt severe side effects.
The one percent transaction tax reduces liquidity by locking up trader capital. Active traders face repeated deductions that erode their ability to reinvest. Market makers and high-frequency participants reduce activity because costs outweigh potential returns. As liquidity dries up, price discovery weakens and volatility increases.
The flat 30 percent tax on gains further compounds the issue. Investors cannot offset losses against gains or carry losses forward. This structure discourages risk management and long-term investment. Many traders stop trading altogether or shift activity to offshore platforms that do not enforce Indian tax deductions.
Industry representatives emphasize that these outcomes hurt both the market and the government. Reduced onshore activity lowers tax collection potential and pushes users toward unregulated environments.
Demand to Rationalize the 1% TDS
Crypto leaders across India agree on one immediate solution: reduce the one percent transaction tax. They argue that a significantly lower rate can still support transaction tracking without crippling market activity. A smaller deduction would allow traders to maintain capital efficiency and keep liquidity on Indian exchanges.
Lowering the transaction tax could also improve transparency. Traders who return to domestic platforms would operate under Indian oversight rather than moving to foreign exchanges beyond regulatory reach. This shift would help authorities monitor activity more effectively and reduce systemic risks.
Industry voices stress that the transaction tax should function as a reporting tool, not a barrier to participation.
Rethinking the 30% Gains Tax
The crypto sector also calls for a review of the flat gains tax. Leaders propose aligning crypto taxation with existing capital gains frameworks or income tax slabs. Such alignment would place crypto on equal footing with other financial assets instead of treating it as an exceptional category.
Allowing loss offsets represents another major request. Loss set-offs encourage responsible trading, portfolio diversification, and long-term participation. Without this option, investors face asymmetric risk that deters serious engagement with the market.
Reforming this tax structure could attract institutional investors who currently avoid the Indian market due to unfavorable economics.
Industry Voices and Unified Advocacy
Executives from major Indian exchanges and trading platforms have spoken openly about the need for reform. They frame their demands as collaborative rather than confrontational. Many emphasize that the industry seeks regulation, not regulatory avoidance.
These leaders argue that thoughtful policy can strengthen compliance, protect consumers, and generate sustainable revenue. They also highlight that India already enforces strong identity verification and reporting standards across exchanges, which positions the country well to manage crypto activity responsibly.
Their advocacy focuses on partnership with policymakers rather than resistance.
Regulatory Clarity Beyond Taxation
Tax reform alone will not solve the sector’s challenges. Industry participants also request clear legal definitions for cryptocurrencies and related activities. They want policymakers to specify whether digital assets fall under securities law, commodities law, or a new category altogether.
Clear definitions would guide compliance requirements, licensing processes, and enforcement standards. Businesses could then structure operations confidently and attract long-term investment. Consumers would benefit from stronger protection and clearer dispute resolution mechanisms.
The sector also seeks guidance on custody rules, exchange oversight, and cross-border transactions. Without such clarity, even well-intentioned companies face operational risk.
Impact on Innovation and Employment
Crypto and blockchain technology extend far beyond trading. Indian developers build decentralized finance platforms, gaming ecosystems, tokenized assets, and enterprise blockchain solutions. These activities generate high-skill employment and exportable intellectual property.
Unclear rules threaten this innovation pipeline. Startups relocate to countries with predictable frameworks, taking talent and capital with them. Investors choose markets that support experimentation within defined boundaries.
Industry leaders argue that India risks losing its competitive advantage if it fails to act decisively.
Government Concerns and the Need for Balance
Regulators have historically expressed concerns about financial stability, consumer protection, and misuse of private cryptocurrencies. These concerns remain valid and deserve serious consideration. However, industry voices argue that strict taxation does not address these risks effectively.
Clear rules, robust compliance requirements, and strong enforcement can mitigate risks more effectively than high taxes alone. Balanced regulation can encourage responsible behavior while discouraging illicit activity.
The sector believes policymakers can achieve oversight without stifling growth.
What Budget 2026 Could Signal
The upcoming Union Budget represents more than a fiscal announcement for the crypto industry. It serves as a signal of the government’s long-term stance on digital assets. Even modest changes could indicate openness to dialogue and reform.
If the government reduces transaction taxes, reviews the gains tax structure, and outlines a roadmap for regulation, the market could regain confidence quickly. Liquidity could return to domestic exchanges, startups could expand operations, and investors could re-engage.
If the government maintains the status quo, uncertainty may persist, and offshore migration may continue.
Conclusion
India’s crypto sector now stands at a critical crossroads. Rapid adoption and strong technical talent give the country a powerful foundation, but unclear regulation and heavy taxation threaten progress. Industry leaders have articulated clear, reasoned demands for Budget 2026: rational taxes, regulatory clarity, and a collaborative approach to governance.
These requests do not seek unchecked freedom. They seek fairness, predictability, and alignment with global best practices. The decisions made in Budget 2026 will shape India’s crypto landscape for years to come. With thoughtful reform, India can position itself as a global leader in digital assets. Without it, the country risks watching innovation move elsewhere.
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