India’s crypto industry is renewing calls for tax reform ahead of the country’s February Union Budget, arguing that the current framework is discouraging onshore activity as regulatory compliance requirements continue to tighten.
India’s current crypto tax framework, introduced in 2022, levies a flat 30% tax on crypto gains and applies a 1% tax deducted at source (TDS) on most transactions, whether they are profitable or not. At the moment, losses from trades can't be used to offset gains.
Executives from major domestic exchanges say the existing tax regime, particularly transaction-level taxes and restrictions on loss set-offs, no longer reflects how the global digital asset market evolved, nor India's own progress in strengthening oversight and enforcement.
The renewed push comes as policymakers finalize fiscal priorities for the next financial year. The Union Budget of India, expected to be presented on Feb. 1, is widely seen as one of the few avenues through which meaningful tax recalibration can occur without new legislation.
Exchanges Argue Compliance is in Place, Tax Friction Remains
Exchanges argued that sustained pressure on compliant platforms risks pushing liquidity, users and innovation offshore, effectively undermining the oversight goals regulators are attempting to achieve.
In a statement sent to Cointelegraph, Nischal Shetty, founder of domestic exchange WazirX, said that India has an opportunity to refine its crypto framework in a way that balances enforcement with innovation.
“As India prepares for Budget 2026, there is a clear opportunity to fine-tune a framework which supports transparency and compliance while fostering innovation,” Shetty said.
Shetty argued that the current regime should be reassessed "in line with how Web3 has matured over the last couple of years globally," citing increased institutional adoption and evolving regulations worldwide.
He said 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.
Raj Karkara, the chief operating officer of Indian crypto exchange ZebPay, echoed similar views, calling the upcoming budget a "pivotal moment" for the sector.
“A rationalisation of the current 1% TDS on crypto transactions could meaningfully improve liquidity and encourage stronger onshore participation,” Karkara said, adding that a review of the flat 30% tax on crypto gains would create a more predictable investment environment.
SB Seker, the head of APAC at crypto exchange Binance, said the upcoming budget presents a chance to recalibrate India's crypto tax framework in line with growing retail participation.
He argued that a more pragmatic approach, which focuses on capital gains realized, with limited loss set-offs and the removal of transaction-level levies, would improve fairness for users and signal a move away from what he called a “tax-and-deter” regime.
“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 added.
Industry Calls for Reforms Amid Tighter Enforcement
The calls for tax reform come as crypto platforms face increasingly strict compliance requirements in India.
On Monday, India’s Financial Intelligence Unit introduced new Know Your Customer rules requiring exchanges to verify users through live selfie checks, geolocation and IP tracking, bank account verification and additional government-issued identification.
At the same time, tax authorities continued to voice concerns over the digital asset sector's impact on enforcement.
On Jan. 8, officials from India’s Income Tax Department warned lawmakers that offshore exchanges, private wallets and decentralized finance tools complicate efforts to track taxable crypto income.