Budget 2026 Puts Spotlight on Crypto as Industry Seeks Tax Relief and Regulatory Clarity
As preparations for Budget 2026 gather pace, India’s cryptocurrency industry is intensifying calls for clearer regulations and a more balanced tax framework. Market participants argue that current policies, particularly the 1% tax deducted at source (TDS) on crypto transactions, have constrained liquidity and driven trading activity offshore. Industry stakeholders are urging the government to rationalise taxes while maintaining oversight, contending that a predictable policy environment could unlock innovation, boost compliance, and strengthen India’s position in the global digital asset economy. The debate highlights the challenge of aligning revenue objectives with sector growth.
Industry Push for Policy Clarity
India’s crypto ecosystem has matured rapidly, but regulatory ambiguity continues to weigh on growth. Industry leaders are calling for well-defined rules that clearly distinguish between different digital assets, trading activities, and use cases. They argue that clarity would encourage responsible innovation and reduce uncertainty for investors and entrepreneurs.
A transparent framework is also seen as essential for attracting institutional capital and long-term investments.
The 1% TDS Debate
At the centre of the discussion is the 1% TDS levied on crypto transactions. While introduced to improve traceability, the tax has significantly reduced trading volumes on domestic platforms. Exchanges note that frequent deductions erode capital efficiency, particularly for active traders and market makers.
The industry is advocating a lower or alternative mechanism that preserves transaction visibility without impairing market liquidity.
Tax Structure and Global Competitiveness
Beyond TDS, stakeholders are seeking a more nuanced tax regime that aligns with global practices. High effective tax rates, combined with compliance complexity, risk pushing innovation and capital to more accommodating jurisdictions.
A rationalised tax structure, they argue, could expand the tax base over time by encouraging onshore participation rather than suppressing activity.
Government Balancing Act
For policymakers, Budget 2026 presents a delicate balancing act. Authorities must safeguard financial stability and prevent misuse while fostering a nascent but strategically important sector. Recent moves to integrate crypto platforms into existing compliance frameworks suggest a preference for regulation over prohibition.
Any tax adjustments will likely be evaluated against revenue considerations and enforcement effectiveness.
Implications for Investors and Startups
Clearer rules and tax relief could provide much-needed certainty for investors and startups alike. Reduced friction may improve liquidity, enhance price discovery, and support the development of ancillary services such as custody, compliance technology, and blockchain infrastructure.
The broader digital economy stands to benefit from a more supportive policy stance.
Conclusion
The crypto industry’s expectations from Budget 2026 underscore its desire to operate within a stable and predictable regulatory environment. Rationalising the 1% TDS and offering clearer guidelines could mark a turning point, enabling India to balance oversight with innovation. How the government responds will shape the sector’s trajectory and its role in the country’s evolving financial landscape.
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