Industry experts argue that transaction-level fees and limits on losses are making it harder for people to get money as India cracks down on crypto compliance and enforcement.
As the regulatory compliance requirements increase and get stricter, India’s crypto industry is once again calling for tax reform before the country’s Union Budget in February. They say that the existing system makes it harder for businesses to operate in India.
India’s current crypto tax system, which started in 2022, charges a flat 30% tax on crypto gains and a 1% tax deducted at source (TDS) on most transactions, even if they don’t make money. Right now, you can’t use losses from transactions to lower your gains.
Executives from major local exchanges claim that the current tax system, especially transaction-level taxes and limits on loss setoffs, no longer reflects how the global digital asset market has changed or how India has improved its governance and enforcement.
As lawmakers finish setting their fiscal priorities for the next financial year, the drive has started again. People think that the Union Budget of India, which is due to be released on February 1, is one of the few ways that real tax changes can happen without new laws.
Exchanges said that putting constant pressure on compliant platforms could drive away liquidity, users, and innovation, which would defeat the purpose of regulators’ supervision efforts.
Industry leaders urge balance between enforcement and innovation
As India prepares for Budget 2026, there is a clear opportunity to refine a framework that fosters innovation and simultaneously supports transparency and compliance. The present system should be looked at again in line with how Web3 has matured over the last couple of years globally, pointing to more institutions using it and changing rules around the world.
A carefully planned cut in transaction-level TDS and a review of loss off-set provisions might assist in bringing back onshore liquidity, making sure that more economic activity stays in India, and making sure that people follow the rules.
Raj Karkara, the chief operating officer of the Indian crypto exchange ZebPay, agreed, saying that the 2018 budget would be a “pivotal moment” for the industry.
Karkara mentioned that “changing the current 1% TDS on crypto transactions could significantly boost liquidity and encourage more people to participate in the market within India.” A reassessment of the flat 30% tax on crypto gains would make the investment climate more predictable.
SB Seker, the head of APAC at the cryptocurrency exchange Binance, stated that the upcoming budget is a chance to modify India’s crypto tax system to better reflect the expanding number of people who buy and sell cryptocurrencies.
A more practical approach that focuses on capital gains realised, with limited loss setoffs and the abolition of transaction-level charges, would be fairer for users and show that the government was moving away from what he called a “tax-and-deter” system.
Clear and consistent operating standards for VDA platforms that are in line with India’s priorities for AML/KYC and investor protection will encourage responsible capital investment, create skilled jobs, and build domestic capabilities.
Tighter compliance rules add urgency to reform calls
India’s Financial Intelligence Unit announced new Know Your Customer guidelines on Monday. These laws say that exchanges must confirm users’ identities using live selfies, geolocation and IP tracking, bank account verification, and other forms of government-issued ID.
At the same time, tax officials were saying they were worried about how the digital asset industry might affect enforcement.
Officials from India’s Income Tax Department told lawmakers on January 8 that offshore exchanges, secret wallets, and decentralised finance tools make it harder to find taxable cryptocurrency income.