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India’s crypto industry is urging the government to reduce or eliminate the country’s 30% tax on digital asset gains and 1% transaction levy ahead of the Union Budget 2026, arguing the current rules have pushed an estimated ₹5 lakh crore in trading volume to offshore exchanges over the past year.
WazirX founder Nischal Shetty and Delta Exchange CEO Pankaj Balani said the tax structure, introduced in 2022, has drained domestic liquidity and weakened regulatory oversight by forcing traders onto foreign platforms outside India’s jurisdiction.
“The intent behind the policy was understandable, but its execution has had unintended consequences,” said Nischal Shetty, founder of WazirX. “As India prepares for Budget 2026, there is a real opportunity to refine the India Crypto Tax framework to support transparency while allowing the ecosystem to grow.”
When the government rolled out the India Crypto Tax regime, officials framed it as a necessary step to bring digital assets into the formal tax net. The 1% TDS was designed to create an audit trail, while the 30% tax aimed to ensure parity with speculative income.
Industry participants acknowledge that the measures improved reporting and traceability. However, they argue that the cost has been steep. High-frequency traders and market makers, in particular, found the 1% TDS unworkable, as it locked up capital and reduced trading efficiency.
“The India Crypto Tax rules made it extremely expensive to operate onshore,” said Shetty. “Liquidity dried up almost overnight, and users simply moved to offshore platforms.”
Data cited by Delta Exchange suggests that between October 2024 and October 2025, Indian traders generated nearly ₹5 lakh crore in volume on overseas exchanges—activity that largely falls outside India’s regulatory reach.
Industry leaders are increasingly framing the India Crypto Tax debate around economic leakage and systemic risk. According to Pankaj Balani, CEO and co-founder of Delta Exchange, the migration of users to foreign platforms undermines consumer protection and deprives India of jobs and tax revenue.
“When trading shifts offshore, enforcement becomes harder and accountability weakens,” Balani said. “A more balanced India Crypto Tax policy would keep activity within India’s regulated perimeter while strengthening compliance.”
Balani also warned that reliance on foreign exchanges introduces broader risks. “Relying on non-accountable overseas platforms for financial infrastructure creates vulnerabilities. India needs a ‘Make in India’ approach for crypto—support compliant domestic players and act firmly against unauthorized operators.”
Executives argue that the global crypto landscape has changed dramatically since 2022. Institutional participation has increased, market infrastructure has matured, and several major jurisdictions have adopted more nuanced regulatory frameworks.
“In many countries, regulators are focusing on risk-based supervision rather than blunt taxation,” said a senior policy advisor at an Indian crypto firm who requested anonymity. “India Crypto Tax policy needs to evolve with the market.”
A key demand from the industry is reducing or removing the 1% TDS and allowing losses to be offset against gains—standard practice in most asset classes. Executives say such changes would not weaken oversight but would significantly improve market efficiency.
While industry pressure is mounting, policymakers remain cautious. Earlier this month, tax officials warned that cryptocurrency activity could undermine enforcement of tax laws if left unchecked.
The Income Tax Department (ITD), operating under the Central Board of Direct Taxes, raised these concerns during a parliamentary standing committee on finance. Officials highlighted the speed, cross-border nature, and pseudonymous features of crypto transactions as enforcement challenges.
In response, authorities have tightened compliance requirements. The Financial Intelligence Unit (FIU) has rolled out stricter onboarding and monitoring rules, requiring live identity verification and enhanced Client Due Diligence (CDD) processes.
“These steps reflect the government’s focus on preventing misuse,” said a former tax official familiar with the discussions. “Any adjustment to India Crypto Tax will need to balance growth with enforcement.”
As Budget 2026 draws closer, the debate over India Crypto Tax is shaping up to be a critical policy test. Industry leaders argue that maintaining the status quo risks pushing India further behind in a sector with global strategic importance.
“The goal should be smart regulation, not punitive taxation,” Shetty said. “A calibrated India Crypto Tax regime can keep innovation at home while ensuring transparency and compliance.”
Whether the government moves to ease the tax burden or maintains its hard line remains uncertain. What is clear is that India Crypto Tax policy now sits at the intersection of revenue, regulation, and India’s ambition to be a global technology hub.
