India’s Crypto Leaders Demand Rollback of 1% TDS, Slash of 30% Tax Before Budget
India's digital asset industry is mounting a full-court press on New Delhi. With the annual budget looming, executives are pushing hard to dismantle what they call 'crippling' tax barriers.
The Double Tax Blow
At the heart of the fight are two numbers: a 1% tax deducted at source (TDS) on every transaction and a flat 30% tax on all crypto gains. The industry argues this one-two punch has frozen trading volumes and driven innovation offshore. They claim the 1% TDS, in particular, kills liquidity by making high-frequency trading and market-making economically unviable.
A Budget Plea
The lobbying push is timed for the upcoming Union Budget. The ask is straightforward: scrap the 1% TDS and rationalize the 30% capital gains tax to align with other asset classes. The argument hinges on lost revenue—the government may be collecting less from a stifled industry than it would from a thriving, taxable one. A classic case of killing the golden goose, or in this case, the digital goose before it even lays an egg.
The stakes are high. India represents one of the world's largest potential crypto markets, but its regulatory stance has been a cautionary tale in how heavy-handed taxation can chill an entire sector overnight. The finance ministry now faces a choice: double down on control or unlock what advocates say is a trillion-dollar digital future. The industry's message is clear—the current tax regime isn't just tough, it's terminal.
India’s Crypto Tax Push Improved Traceability but Drained Liquidity
India introduced the 30% VDA tax and the 1% TDS in 2022 as part of a broader push to bring digital asset activity into the formal tax net.
While the measures succeeded in improving transaction traceability, industry participants say they have also had unintended consequences, including a sharp drop in onshore liquidity and a migration of traders to overseas platforms beyond Indian jurisdiction.
“As India prepares for Budget 2026, there is a clear opportunity to fine-tune a framework that supports transparency and compliance while fostering innovation,” said Nischal Shetty, founder of WazirX.
He added that a reduction in TDS and a review of loss set-off rules could help keep more economic activity within India’s regulated perimeter without weakening oversight.
Executives argue that the global crypto market has evolved significantly since the tax rules were introduced, with greater institutional participation and clearer regulatory approaches emerging in several major jurisdictions.
Sad to see
India
has the most crypto owners in the world, with 93M+ users.
Yet, we still have no clear crypto policy.
While countries like Singapore, Dubai, and U.S are trying to become crypto hubs, India is stuck with:
– 30% tax on every trade
– 1% TDS on every… pic.twitter.com/2pIrL5U8oT
The industry is also framing the debate in terms of economic leakage.
According to estimates cited by Delta Exchange, Indian users contributed nearly ₹5 lakh crore in trading volume on offshore exchanges between October 2024 and October 2025.
Executives warn that when platforms operate outside Indian oversight, consumer protection weakens and jobs and tax revenues Flow overseas.
“Relying on non-accountable foreign platforms for critical financial infrastructure introduces systemic risk,” said Pankaj Balani, CEO and co-founder of Delta Exchange, calling for a “Make in India” approach that backs compliant domestic platforms while acting decisively against unauthorised operators.
India Tax Officials Warn Crypto Could Weaken Enforcement of Tax Rules
Earlier this month, Indian tax officials renewed concerns over cryptocurrency activity, warning that the growing use of digital assets could undermine the country’s ability to enforce tax rules effectively.
The caution was raised by the Income Tax Department (ITD), which operates under the Central Board of Direct Taxes, during a recent parliamentary standing committee on finance.
As reported, India has also moved to tighten oversight of cryptocurrency platforms, with the Financial Intelligence Unit introducing stricter identity and monitoring requirements aimed at curbing illicit activity.
The new rules require platforms to go beyond basic document uploads during onboarding.
Reporting entities must carry out live identity verification and implement stronger Client Due Diligence (CDD) processes, reflecting concerns about the speed and pseudonymous nature of crypto transactions.
