India Faces Pressure to Rethink Crypto Taxes Ahead of Union Budget as Trading Shifts Offshore

As India approaches this year's Union Budget, policymakers are nether unit to reassess the country’s punitive crypto taxation model amid superior formation to offshore platforms, raising questions astir mislaid taxation gross and weakened regulatory oversight.

Indian crypto users execute astir three-quarters of their crypto measurement offshore, astir $6.1 cardinal (₹51,252 crore), with conscionable 27.33% remaining connected home platforms, according to a report from crypto taxation level KoinX.

Finance Minister Nirmala Sitharaman is acceptable to present her ninth consecutive fund connected Sunday, a archetypal successful implicit 2 decades, with the crypto manufacture watching for alleviation from a taxation authorities that has gutted home trading volumes and pushed enactment to overseas exchanges accessed via VPNs.

Despite ranking archetypal successful grassroots crypto adoption according to Chainalysis’ figures, India's tax-heavy, policy-light attack has created a regulatory limbo that contrasts with structured frameworks emerging crossed Asia.

"India's VDA ecosystem is astatine a pivotal stage, with increasing adoption crossed the country; however, the existent taxation model presents challenges for retail participants by taxing transactions without recognising losses, creating friction alternatively than fairness," Ashish Singhal, co-founder of crypto speech CoinSwitch, told Decrypt.

The 3 wide requests for the 2026 Budget see taxation rationalisation done “reduced Tax Deducted astatine Source (TDS) and allowing nonaccomplishment set-offs; a regulatory mechanics for the sector; and encouraging blockchain adoption, some permissioned and permissionless,” Dilip Chenoy, Chairman of Bharat Web3 Association, told Decrypt.

India's Tax Department Echoes Reserve Bank's Concerns connected Crypto

In February 2022, the government announced a 30% tax connected crypto income, with nary deductions oregon exemptions.

"No deduction successful respect of immoderate expenditure oregon allowance shall beryllium allowed portion computing specified income but outgo of acquisition," Sitharaman noted successful her Budget 2022 presentation.

The curate specified that gifting of virtual integer assets would beryllium taxed astatine the recipient's end, portion losses could not beryllium acceptable disconnected against immoderate different income. Investors couldn't amusement losses from terms drops oregon hacking incidents to offset taxation connected profits.

The 1% TDS has hammered high-frequency traders and liquidity providers who run connected bladed margins, making their concern models unsustainable connected home platforms.

The authorities tightened successful the 2025 Union Budget, erstwhile undisclosed crypto gains were brought nether Section 158B of the Income Tax Act, enabling retrospective audits connected transactions dating backmost 48 months.