Crypto industry demands regulatory clarity, tax relief in Budget 2026
What's the story
The virtual digital assets (VDAs) sector in India is looking for regulatory clarity, a clear taxation policy, and a cryptocurrency framework in the upcoming Union Budget 2026. Finance Minister Nirmala Sitharaman will present the Budget on February 1. Abhay Agarwal, founder of Getbit, said India has over 100 million crypto users and an active digital asset economy that is growing faster than other countries.
Market growth
India's digital economy and retail user participation
SB Seker, Head of APAC at Binance, said India's rapid adoption of blockchain and VDAs shows the scale of its digital economy and growing retail user participation. He believes the Budget is an opportunity to strengthen the VDA ecosystem, refine the taxes, and support responsible market development. Virtual digital assets or VDAs are defined as a digitally represented code/token exchanged for value or with promise of inherent value.
Tax implications
Current taxation framework for VDAs in India
Under the current taxation framework, any income from transfer of VDAs is taxed at a rate of 30% plus surcharge and cess. There are no deductions for expenditure or allowance, and losses from transfer of VDAs can't be carried forward. In case of gifting VDAs, tax is paid by the recipient. From July 1, 2022, Section 194S was inserted for withholding tax at a rate of 1% on payment/credit to any resident as consideration for transfer of a VDA.
Anticipated changes
Stakeholders' expectations from Union Budget 2026
Nischal Shetty, founder of WazirX, said Budget 2026 is an opportunity to "finetune a framework which supports transparency and compliance while fostering innovation." He emphasized the need for clarity to push the cryptocurrency industry and help India achieve its $5 trillion economy target. Raj Karkara, COO of ZebPay, agreed that "a clear and consistent framework for digital assets would help strengthen trust among investors."
Tax reform
Tax framework rework and industry expectations
Shetty suggested a calibrated lowering in transaction-level TDS and a review of loss set-off provisions to restore onshore liquidity, improve compliance, and also ensure more economic activity remains within India's regulated perimeter. Karkara endorsed "a rationalization of the current 1% TDS on crypto transactions could meaningfully improve liquidity." The industry seeks a reduction in TDS on VDA transactions from 1%, raising the threshold to ₹5 lakh, reviewing flat 30% tax on VDA gains, allowing offset for losses from VDA transactions.
Regulatory expectations
Industry hopes for clarity and fairness in regulation
The industry also seeks alignment of capital gains taxation with the income slabs, a dedicated Crypto Bill in India, and alignment of SEBI guidelines for firms holding BTC on their balance sheets. Singhal said the current tax framework presents challenges for retail participants as it taxes transactions without recognizing losses.