Budget 2026 Maintains Strict Crypto Tax Rules, Industry Voices Disappointment

The Indian government has announced its Union Budget for the 2026 financial year, leaving the controversial tax framework for virtual digital assets (VDAs), commonly known as cryptocurrencies, completely unchanged. This decision dashes the hopes of the domestic crypto industry, which had been lobbying for significant reforms to boost participation and innovation.

Finance Minister Nirmala Sitharaman’s budget speech confirmed that the existing tax rules, first introduced in the 2022 budget, will remain in force. The key provisions include a 30% tax on profits from crypto asset transfers and, more critically, a 1% Tax Deductuced at Source (TDS) on every transaction. Furthermore, investors are still not allowed to offset losses from one crypto investment against gains from another.

Industry Reaction: A Missed Opportunity for Clarity and Growth

The immediate reaction from cryptocurrency exchanges, blockchain startups, and investor groups has been one of profound disappointment. Industry bodies had presented detailed proposals to the government, arguing that the current regime is stifling. They view the status quo as a major missed opportunity to provide regulatory clarity and foster a more supportive environment for Web3 technologies.

Industry representatives argue that the 1% TDS, in particular, continues to cripple trading volumes on domestic exchanges. They state that it makes high-frequency trading impossible and drives both users and business activity to foreign, unregulated platforms. This, they warn, results in a loss of potential tax revenue and visibility for the Indian government.

Understanding the Impact of the Current Tax Rules

For general investors, the unchanged rules mean the landscape for crypto investing remains challenging. The 30% flat tax on gains is higher than the rate for many other asset classes. The inability to set off losses is another significant hurdle. If an investor loses money on one cryptocurrency trade, they cannot use that loss to reduce the taxable profit from a successful trade, unlike with equities.

The 1% TDS affects liquidity directly. On every transaction, 1% of the total value is withheld as tax. For active traders, this constant drain on capital makes many strategies unviable. Experts say this has led to a dramatic fall in trading volumes on Indian exchanges since the rule was implemented, with many casual traders exiting the market entirely.

Government’s Stance and Global Context

The government’s decision to hold firm suggests a continued cautious, wait-and-see approach to the crypto sector. Officials have previously expressed concerns about the speculative nature of crypto assets and potential risks to financial stability. By maintaining a tight tax grip, the government may be aiming to discourage speculative trading while it continues to develop a broader regulatory framework.

Globally, the approach varies. Some nations have embraced crypto with clear regulations and favorable tax treatments to attract businesses. Others have taken a harder line. India’s current path places it in a restrictive category, prioritizing control and revenue collection over market development. The industry had hoped Budget 2026 would signal a shift toward a more balanced policy that recognizes innovation.

In conclusion, Budget 2026 offers no relief for India’s crypto ecosystem. The retention of the 1% TDS and restrictive loss-offset rules indicates the government is not yet ready to revise its stance. For investors and companies in the space, this means operating in a high-cost, low-liquidity environment for the foreseeable future. The industry’s call for reform will now likely focus on the next budget cycle, as it argues that progressive regulation is key to harnessing the potential of blockchain technology and retaining talent and capital within India.