As Union Budget 2026 approaches, cryptocurrency investors in India are once again hoping for major relief from the government. The crypto community is urging Finance Minister Nirmala Sitharaman to reconsider the current tax structure on virtual digital assets (VDAs), especially the 1% TDS on transactions and the 30% flat tax on profits.
The strict tax rules were introduced in Union Budget 2022, when the government announced a 30% tax on income from cryptocurrencies and a 1% TDS on every crypto transaction. These provisions came into effect from July 1, 2022. While the move brought regulatory clarity, it also significantly impacted trading activity and investor sentiment.
Since the introduction of the 1% TDS, trading volumes on Indian exchanges have dropped sharply. Many traders shifted to offshore platforms to avoid high transaction costs and blocked capital. The industry believes that such heavy taxation discourages genuine investors and affects India’s competitiveness in the global crypto market.
Crypto exchanges and investors argue that the existing framework:
Reduces liquidity in the market
Blocks working capital of traders
Pushes users towards foreign platforms
As a result, the Indian crypto ecosystem has struggled to grow at the pace seen in other countries.
One of the biggest expectations from Budget 2026 is a reduction in TDS on crypto transactions. The industry has proposed that TDS should be cut from 1% to 0.01%.
According to industry leaders, this would:
Maintain transaction traceability
Reduce the financial burden on traders
Encourage users to return to Indian exchanges
Improve tax compliance
WazirX founder Nischal Shetty has publicly stated that lowering TDS would revive trading activity and help rebuild trust among Indian crypto users.
Currently, profits from crypto are taxed at a flat rate of 30%, irrespective of the holding period. This means whether an investor holds crypto for a few days or several years, the tax rate remains the same.
Experts say this is unfair because:
Equity and mutual fund investors enjoy lower tax rates for long-term investments
Crypto gains are taxed similar to lottery or gambling income
Long-term investors are discouraged from holding digital assets
Due to this, many serious investors are either reducing exposure or moving their investments outside India.
Under the present law, losses from crypto trading cannot be set off against profits from other crypto transactions or any other income. This means:
If an investor makes a loss in one trade and profit in another,
They still have to pay 30% tax on the profit without adjusting the loss
The crypto industry is requesting the government to allow loss set-off within crypto transactions, which would make taxation more rational and investor-friendly.
The crypto community is hoping that the government will:
Simplify crypto tax rules
Reduce TDS to boost liquidity
Reconsider the 30% flat tax structure
Allow loss adjustment
Provide a clear policy framework for Virtual Digital Assets
Industry experts believe that supportive policies can bring users back to Indian platforms, increase compliance, and promote innovation in the digital asset space.
With global economies embracing blockchain and digital assets, Indian investors feel it is time for balanced regulation instead of excessive taxation. If the government addresses these concerns in Budget 2026, it could mark a turning point for the Indian crypto market.
All eyes are now on Finance Minister Nirmala Sitharaman as she prepares to present the Union Budget. Crypto investors across the country are waiting to see whether their long-standing demands will finally be heard.
