India’s crypto industry is urging the government to reconsider punitive tax measures ahead of the Union Budget 2026, with major exchange executives calling for reforms to restore liquidity and encourage compliant onshore trading.
Industry leaders across WazirX, ZebPay, and Binance submitted pre-budget recommendations requesting reductions to the current 1% tax deducted at source on transactions and a review of the flat 30% levy on virtual digital asset gains.
The proposals emerge as India prepares its annual budget presentation scheduled for February 1, following recent regulatory tightening that introduced stricter compliance requirements for crypto platforms.
Executives Call for Tax Reform to Support Growing Web3 Ecosystem
Nischal Shetty, founder of WazirX, told Cryptonews that the budget presents “a clear opportunity to fine-tune a framework which supports transparency and compliance while fostering innovation.”
He argued that the current framework needs reconsideration, given how Web3 has matured globally over recent years through increased adoption and institutional participation.
“A calibrated reduction in transaction-level TDS and a review of loss set-off provisions could help restore onshore liquidity, improve compliance, and ensure that more economic activity remains within India’s regulated perimeter, without compromising oversight or enforcement,” Shetty said.
He added that clear guidelines on permissible activities and compliance standards would strengthen investor confidence and help build a sustainable digital asset ecosystem.
Raj Karkara, chief operating officer at ZebPay, also emphasized that rationalizing the 1% TDS “could meaningfully improve liquidity and encourage stronger onshore participation.“
He called for aligning the 30% flat tax with other asset classes and allowing loss set-offs to create “a more balanced and predictable investment environment.“
Karkara noted that greater policy clarity could unlock innovation-led businesses and enable India’s Web3 ecosystem to utilize its developer talent more effectively.
“A more welcoming and well-defined regulatory framework would allow India to participate more actively in the global crypto economy, align with international standards, and reinforce confidence that policy is actively guiding the sector,” he said.
Industry Seeks Policy Clarity
The budget appeals follow India’s recent implementation of stricter oversight measures for cryptocurrency platforms.
The Financial Intelligence Unit introduced enhanced Anti-Money Laundering and Know Your Customer procedures on January 8, requiring live identity verification, comprehensive data collection including IP addresses and geolocation, and mandatory Permanent Account Number verification before any trading activity.
SB Seker, head of Asia-Pacific at Binance, told Cryptonews that India’s approach should move “past the tax-and-deter regime towards a fuller license-and-supervise one.“
He proposed focusing capital gains taxation on realized profits rather than transaction-level levies, suggesting that a shift toward net-revenue-generating corporate taxes would improve fairness for retail participants.
“Clear, consistent operating standards for VDA platforms, aligned with India’s AML/KYC and investor protection priorities, will encourage responsible capital investment, create skilled jobs, and build domestic capabilities,” Seker said.
He added that India’s approach to blockchain governance, combined with its digital public infrastructure, provides a solid foundation to integrate innovation with transparency and financial inclusion objectives.
Tax Authorities Flag Enforcement Challenges Despite Strict Rules
The reform push comes as Indian tax officials warned parliamentary committees that crypto transactions are undermining enforcement capabilities.
The Income Tax Department highlighted how offshore exchanges, private wallets, and decentralized finance tools complicate income tracking and assessment, with officials describing “anonymous, borderless and near-instant” transfers as major challenges.
India currently applies one of the world’s strictest crypto tax regimes despite the industry’s legal status and growing adoption.
The Financial Intelligence Unit approved 49 crypto exchanges during the 2024-2025 fiscal year, while Coinbase returned to the market after a two-year absence.
The Reserve Bank of India separately cautioned in its latest Financial Stability Report that privately issued stablecoins could threaten financial stability, arguing that central bank digital currencies should take precedence.
The central bank said the global stablecoin market reached approximately $300 billion by the end of 2025, with most tokens pegged to the US dollar and held by a few issuers.
Industry observers note that while Budget 2025 delivered significant income tax relief for individuals, expectations for major tax reforms this year remain modest, given revenue pressures and global economic uncertainty.
Tax experts surveyed by Indian media outlets largely predict the government will prioritize stability over additional reforms following last year’s substantial changes to personal taxation.
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