India's Crypto Conundrum: Industry Pleads for Tax & Regulatory Overhaul Ahead of Budget 2026

As the countdown to Budget 2026 officially begins, there's a palpable sense of urgency, almost a collective holding of breath, within India's burgeoning cryptocurrency and Web3 industry. They're not just hoping for a mention; they're actively, vocally appealing to the government for significant changes to what they describe as a stifling tax regime and a confusing regulatory landscape. Frankly, the industry leaders feel caught between a rock and a hard place, and they're calling for a progressive shift that truly unlocks India's digital asset potential.

Let's talk about the elephant in the room: the tax structure. It’s been a major pain point, driving many local users and businesses towards offshore platforms. At the heart of this frustration lies the infamous 1% Tax Deducted at Source (TDS). Imagine this: every single transaction, regardless of profit or loss, gets chipped away. As Sumit Gupta, the sharp mind behind CoinDCX, quite aptly puts it, this 1% TDS cripples liquidity and effectively locks up capital for traders and investors. It’s almost like tying one hand behind their back, making it incredibly difficult to operate efficiently in a fast-paced market. This isn't just an inconvenience; it's a major disincentive, nudging users, even seasoned ones, to seek alternatives where their capital isn't held hostage.

Then there’s the flat 30% tax on gains, which, coupled with the inability to offset losses against profits, feels particularly punitive. Think about it: in virtually any other asset class – stocks, mutual funds, even real estate – you can usually deduct your losses against your gains. But not here. If you make money in one trade but lose it all in another, you're still taxed on the initial gain. Rajagopal Menon from WazirX rightly highlights this disparity, calling for a more equitable treatment that aligns crypto with other asset classes. This isn't asking for special treatment, mind you; it's asking for fair treatment, which many argue is crucial for a nascent industry trying to find its footing.

Beyond the direct tax implications, the lack of a clear, coherent regulatory framework looms large. It creates an environment of uncertainty that discourages institutional participation and hinders genuine innovation. Without clear guidelines, how can businesses plan, invest, and grow with confidence? Ashish Singhal of CoinSwitch emphasizes that a lack of regulation acts as a significant barrier, pushing Indian talent and capital abroad. It’s a brain drain, essentially, where promising startups and skilled professionals are forced to look beyond Indian shores for clarity and growth opportunities.

So, what’s the big ask from the industry? For starters, they're urging the government to draw a distinction between utility tokens, which are used to access services within a blockchain ecosystem, and speculative investment assets. This nuanced approach, as suggested by the Blockchain and Crypto Assets Council (BACC), could pave the way for a more sensible, tiered tax structure. Furthermore, Nischal Shetty, co-founder of Shardeum and a key figure in the Web3.0 Alliance, passionately advocates for an 'innovation sandbox.' This concept, common in other progressive economies, allows new technologies to be tested within a controlled regulatory environment, fostering growth without immediate, heavy-handed restrictions.

The message is clear and consistent: India has the potential to be a global leader in Web3 and blockchain innovation. But to realize this potential, the government needs to implement a progressive tax regime and a robust regulatory framework that encourages, rather than deters, participation. Budget 2026 presents a critical opportunity – a chance to turn the tide, stem the outflow of capital and talent, and truly embrace the digital future. The crypto industry, it seems, is ready to collaborate, hoping that their collective voice will finally be heard and acted upon.