India’s crypto industry is renewing calls for tax reform ahead of the February Union Budget, arguing that the current framework is discouraging onshore activity even as regulatory compliance requirements continue to tighten.
India’s crypto tax regime, introduced in 2022, imposes a flat 30% tax on crypto gains alongside a 1% tax deducted at source (TDS) on most transactions, regardless of profitability. Trading losses cannot be offset against gains, a structure industry executives say places domestic platforms at a competitive disadvantage.
Leaders from major Indian exchanges argue that transaction-level taxes and restrictions on loss set-offs no longer reflect how global digital asset markets have evolved, nor India’s own progress in strengthening oversight and enforcement.
The renewed push comes as policymakers finalize fiscal priorities for the next financial year. India’s Union Budget, expected on Feb. 1, is widely seen as one of the few avenues for meaningful tax recalibration without requiring new legislation.
Exchanges say compliance is in place, tax friction remains
Industry executives warn that sustained pressure on compliant platforms risks pushing liquidity, users and innovation offshore, undermining the very oversight goals regulators aim to achieve.
In a statement shared with Cointelegraph, Nischal Shetty, founder of domestic exchange WazirX, said India has an opportunity to refine its crypto framework to better balance enforcement with innovation.
“As India prepares for Budget 2026, there is a clear opportunity to fine-tune a framework that supports transparency and compliance while fostering innovation,” Shetty said.
He added that the current regime should be reassessed “in line with how Web3 has matured globally over the past few years,” pointing to rising institutional adoption and evolving regulatory approaches worldwide. A calibrated reduction in transaction-level TDS and a review of loss set-off provisions, he said, could help restore onshore liquidity and improve compliance.
Raj Karkara, chief operating officer of Indian exchange ZebPay, echoed those views, calling the upcoming budget a “pivotal moment” for the sector.
“A rationalisation of the current 1% TDS on crypto transactions could meaningfully improve liquidity and encourage stronger onshore participation,” Karkara said, adding that revisiting the flat 30% tax on gains would create a more predictable investment environment.
SB Seker, Binance’s head of APAC, said the budget presents an opportunity to recalibrate India’s crypto tax framework in line with growing retail participation. He argued that a more pragmatic approach—focused on realized capital gains, limited loss set-offs and the removal of transaction-level levies—would improve fairness for users and signal a shift away from what he described as a “tax-and-deter” regime.
“Clear, consistent operating standards for virtual digital asset platforms, aligned with India’s AML, KYC and investor protection priorities, would encourage responsible investment, create skilled jobs and build domestic capabilities,” Seker added.
Reform calls grow amid tighter enforcement
The push for tax reform comes as crypto platforms face increasingly stringent compliance requirements in India.
On Monday, the Financial Intelligence Unit introduced new Know Your Customer rules requiring exchanges to verify users through live selfie checks, geolocation and IP tracking, bank account verification and additional government-issued identification.
At the same time, tax authorities have continued to raise concerns about enforcement challenges. On Jan. 8, officials from India’s Income Tax Department warned lawmakers that offshore exchanges, private wallets and decentralized finance tools complicate efforts to track and tax crypto-related income.
