Budget 2026: Smart tax tweaks that could boost India's crypto ecosystem

In the four years since India formally brought crypto assets under the tax net (in the Union Budget 2022), the country has moved from ambiguity to acknowledgement. Virtual digital assets are now clearly defined in law and are taxed at a flat 30 per cent on profits. There is also a  1 per cent tax deducted at source (TDS) on transactions. This clarity, in itself, was a necessary first step.

Vital tax numbers
What Budget 2026 offers is an opportunity for the second step: refinement. The existing framework has delivered measurable outcomes. According to Finance Ministry disclosures, the government collected ₹269 crore in income tax from VDAs in FY23, rising to ₹437 crore in FY24. The TDS collections crossed ₹500 crore in FY25. These numbers establish two facts. One, crypto activity in India is real, taxable, and visible. Two, compliance-led platforms are generating verifiable revenue for the exchequer.

Movement to offshore platforms
Yet, taxation is not only about collection; it is also about behaviour. The 1 per cent TDS, while effective as a tracking tool, has had the unintended effect of reducing trading efficiency and liquidity on compliant Indian platforms. Many users have either slowed activity or shifted transactions offshore, beyond India’s regulatory perimeter. This does not reduce risk; it merely relocates it.

A calibrated reduction in TDS (say to 0.1 per cent while retaining full compliance reporting) would preserve traceability without discouraging participation. It would also help align crypto markets with how other digital financial assets are taxed and monitored.

Another area worth re-examining is tax symmetry. Currently, losses from crypto trades cannot be set off against gains. Allowing limited, well-defined set-offs (with strict audit trails) would reflect how modern financial markets function. 

Huge adoption
India’s strength in crypto has always been adoption. Global studies such as Chainalysis’ crypto adoption index have repeatedly ranked India at or near the top. This has been driven by retail participation, developers, and entrepreneurs. The challenge is converting this grassroots strength into a compliant, innovation-led ecosystem that operates within India’s regulatory boundaries.

Finally, there is room for sharper institutional clarity. Today, crypto exchanges operate under AML and KYC obligations through registration with the Financial Intelligence Unit (FIU-India). This has definitely strengthened oversight. Over time, a more coordinated, single-window regulatory approach (without duplicative compliance layers) would help both industry and enforcement agencies function more effectively.

Budget 2026 need not make dramatic announcements on crypto. Small, thoughtful adjustments would be enough. A tax framework that nudges activity towards compliance, rather than away from it, will ultimately deliver better outcomes for investors, platforms, and the State alike. That, perhaps, is the quiet philosophy the moment calls for.
(The writer is the CEO crypto exchange Giottus.com)