Union Budget 2026: Crypto industry urged taxation overhaul, loss set-off from FM

Union Budget 2026-27 is just a few hours away and the domestic Web 3.0 and crypto industry is expecting rationalization of crypto taxation in India. Finance Minister Nirmala Sitharaman, who shall be tabling her ninth budget (including the interim), on Sunday, February 01, had imposed strict taxation provision on virtual digital assets (VDAs) in 2022.

However, the move indirectly recognized the digital token industry, which continues  to remain unregulated in till date. India remains among the global leaders in crypto adoption, which reflects the strong interest of domestic investors in digital assets.

To recall, Union Budget of 2022 imposed a 30 per cent taxation on the gains from sale of digital tokens, with no liberty to offset the losses in other tokens or assets. Besides this, a 1 per cent tax-deducted at source (TDS) was also imposed on crypto assets, dampening the trading volumes back then.

In a recent report from KoinX, Indian Crypto traders made a profit of Rs 6,394 crore and a loss of Rs 4,781 crore which aggregated from spot, margins and futures trading. KoinX reported these numbers based with 6.71 lakh active users with crypto activity in FY24-25. The report cited 3,902 crore taxable capital gains from aggregate profit as losses are not allowed to offset.

"Our data shows that while a slight majority of users did report net capital gains, a large share of losses couldn’t be offset under current rules, and many users who were overall in losses still ended up with tax liabilities because of how taxable income is calculated," said Punit Agarwal, Founder & CEO at KoinX.

Indian traders conduct 72.66 per cent of their crypto volume on global exchanges versus 27.33 per cent on domestic ones. Despite this, the 1 per cent TDS applies only to certain Indian platform trades, where it consumes 0.60 per cent of total turnover.

In FY 2024–25, 50.91 per cent of users reported net profits, while 49.09 per cent users reported net capital losses but still paid taxes on Rs 180 crore of taxable capital profits, as losses could not be offset under section 115BBH. Interestingly 95.95 per cent of capital profits in cryptos is captured by top 5 per cent traders, hinting at high speculative and velocity market, it added.

Having clear, data-led visibility into how profits, losses and taxes play out in practice is important. It helps move the conversation from assumptions to evidence, and enables more constructive discussions between investors, platforms and policymakers, he said.

The data, shared by the Ministry of Finance in reply to a question in the Rajya Sabha, shows that the government collected Rs 511.8 crore as TDS on crypto transactions in 2024-25. This hints that the the value of cryptocurrency transactions in India exceeded Rs 51,000 crore in 2024-25, according to the analysis of this data, representing a 41 per cent increase on a yearly basis.

"There is an opportunity to adopt a more balanced and forward-looking approach, said Edul Patel, CEO at Mudrex. "He seeks to reduce the TDS to 0.1 per cent and allowing loss offsetting would ease friction for investors, improve transparency, and support the long-term, sustainable growth of India’s crypto industry."

Seconding Patel's demand, Vikas Gupta, Country Manager - India at Bybit said that rationalising the existing 30 per cent tax on virtual digital assets and revisiting the 1 per cent TDS by reducing it to a more practical level would help bring users back into the regulated domestic ecosystem, improve compliance, and support stronger market liquidity.

"A balanced and progressive tax framework would incentivise long-term participation over short-term speculative activity, strengthen transparency, and enhance investor confidence. As global markets increasingly adopt differentiated and pragmatic approaches to crypto taxation, it is important for India to remain competitive and innovation-friendly," Gupta adds.