As India prepares for the Union Budget 2026, the country’s digital asset ecosystem is intensifying calls for a recalibration of crypto taxation. Industry stakeholders are urging the government to reconsider the flat 30% tax on virtual digital asset gains and ease the 1% tax deducted at source, arguing that the current framework has stifled innovation, reduced trading volumes, and pushed activity offshore. At the same time, policymakers are weighing the broader implications of blockchain adoption alongside the gradual rollout of the digital rupee. The budget is emerging as a critical inflection point for the future of crypto in India.
Crypto Taxation Under the Spotlight
Introduced as part of a cautious regulatory approach, India’s 30% tax on gains from virtual digital assets has remained unchanged since its implementation. The policy, coupled with a 1% tax deducted at source on transactions, was designed to improve traceability and curb speculative excesses. However, market participants argue that the regime is among the most stringent globally and has inadvertently dampened domestic participation.
Industry estimates suggest that trading volumes on Indian platforms fell sharply after the tax measures took effect, with a significant share of activity migrating to overseas venues. As a result, domestic exchanges and startups have struggled to scale, despite growing interest in blockchain-based applications.
Industry Push for a Reset
Ahead of Budget 2026, crypto companies, investors, and policy advocates are calling for a more balanced tax structure. Proposals include reducing the headline tax rate to align with other asset classes and lowering the tax deducted at source to improve liquidity and market efficiency. Proponents argue that such changes would not only revive trading activity but also enhance compliance by keeping transactions within the regulated domestic ecosystem.
The industry maintains that a rationalized tax framework could unlock investment, generate employment, and strengthen India’s position as a technology-driven financial hub, without compromising regulatory oversight.
Digital Rupee and Policy Priorities
The debate over crypto taxation is unfolding alongside the government’s push to expand the use of the central bank digital currency. While the digital rupee is positioned as a sovereign alternative that offers efficiency and transparency, experts caution against viewing it as a substitute for private digital assets. Instead, they argue that both can coexist, serving distinct economic functions.
A clearer policy distinction between speculative trading and long-term blockchain innovation could help reconcile these objectives, allowing India to harness the benefits of emerging technologies while safeguarding financial stability.
Market Implications and Investor Sentiment
Investor sentiment remains cautiously optimistic as expectations build around Budget 2026. Any signal of tax relief could act as a catalyst for renewed participation and capital inflows into the sector. Conversely, maintaining the status quo may prolong the slowdown and reinforce India’s reputation as a challenging environment for digital asset businesses.
Beyond immediate market reactions, the budget’s stance on crypto will be closely watched as an indicator of the government’s broader approach to fintech innovation and regulatory certainty.
What to Watch Going Forward
As policymakers finalize budget priorities, the crypto industry is seeking dialogue rather than deregulation. A measured adjustment to taxation, combined with clear compliance guidelines, could mark a shift from restraint to responsible growth. Whether Budget 2026 delivers such a pivot will shape the trajectory of India’s digital asset market for years to come, influencing investment decisions, technological development, and the country’s role in the global crypto economy.
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