As the Union Budget 2026 approaches, stakeholders from India’s rapidly growing crypto and Web3 ecosystem are urging the government to rationalise the current taxation framework for virtual digital assets (VDAs). Industry players argue that existing rules create an uneven playing field when compared to traditional financial instruments such as equities, mutual funds, and commodities.

High Taxes Seen as Barrier to Innovation

At present, crypto transactions in India attract a flat 30% tax on gains, along with a 1% tax deducted at source (TDS) on every transaction, regardless of profit or loss. Industry leaders say this structure discourages active participation, reduces market liquidity, and limits the sector’s ability to innovate and scale within the country.

Call for Differentiated Tax Treatment

Crypto exchanges, blockchain startups, and policy think tanks are advocating for a more nuanced tax regime. Suggestions include allowing the offsetting of losses, lowering or removing the 1% TDS, and introducing long-term capital gains taxation similar to equities. According to industry voices, such measures would bring regulatory clarity without compromising tax compliance.

Impact on Startups and Talent Flight

Several founders warn that India risks losing Web3 entrepreneurs and skilled developers to more crypto-friendly jurisdictions if reforms are delayed. They point out that countries with balanced crypto tax policies have seen higher investments, stronger compliance, and greater innovation in blockchain-based solutions.

Government Balancing Revenue and Regulation

While policymakers remain cautious due to concerns around money laundering and investor protection, industry participants believe that rational taxation could improve transparency rather than reduce oversight. Many expect Budget 2026 to strike a balance between revenue generation and fostering a globally competitive digital asset ecosystem.

Awaiting Policy Signals in Budget 2026

With digital assets becoming an increasingly important part of the global financial system, the upcoming budget is seen as a critical moment. The crypto industry hopes that the government will use Budget 2026 to send a positive signal, aligning taxation policy with India’s broader digital economy ambitions.