What Are the Crypto Tax Expectations for the Indian Union Budget 2026-27?

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What Are the Crypto Tax Expectations for the Indian Union Budget 2026-27?

The Indian Union Budget 2026-27, set to be presented on Sunday, February 1, 2026, is a critical event for digital asset investors hoping for relief from one of the world’s most stringent tax regimes. While the industry is heavily lobbying for tax rationalization and a reduction in Tax Deducted at Source (TDS) to boost domestic liquidity, market analysts anticipate that the government will likely maintain the status quo to discourage speculative trading. This guide outlines the current tax framework, industry demands, and the government’s probable stance on Virtual Digital Assets (VDAs) for the upcoming fiscal year.

What Is the Current Crypto Tax Framework in India as of 2026?

Since the introduction of specific VDA tax laws, India has maintained a rigorous taxation structure designed to track transactions and limit speculative participation. As of January 2026, the following rules apply to all Indian crypto investors:

• Flat 30% Tax Rate: Income generated from the transfer of VDAs is taxed at a flat rate of 30%, plus applicable surcharge and cess, regardless of the individual’s income tax slab.
• No Expense Deductions: Investors cannot claim deductions for any expenses (such as internet costs, advisory fees, or platform charges) other than the cost of acquisition.
• No Set-off or Carry Forward: Losses incurred from one VDA transaction cannot be set off against gains from another VDA transaction, nor can they be carried forward to subsequent assessment years.
• 1% TDS Liability: A 1% Tax Deducted at Source (TDS) is levied under Section 194S on the total consideration paid for VDA transfers, ensuring that every transaction leaves a footprint for tax authorities.

What Are the Key Industry Demands vs. Government Stance?

The narrative leading up to the 2026 Budget is defined by a tug-of-war between industry stakeholders seeking survival and a government focused on financial stability and revenue collection.

• Tax Rationalization vs. Status Quo:
  • Industry Demand: Exchanges and bodies like the Bharat Web3 Association are requesting a review of the 30% tax rate, arguing it should align with other capital assets like equities.
  • Government Stance: Providing tax relief is unlikely, as the government views crypto as a speculative asset class similar to gambling or lottery winnings, rather than a developmental financial instrument.
• TDS Reduction vs. Tracking Mechanism:
  • Industry Demand: There is a strong push to lower the 1% TDS to 0.01% or 0.1%. Industry leaders argue this would restore liquidity to Indian exchanges and discourage users from moving to non-compliant offshore platforms.
  • Government Stance: The Finance Ministry maintains that the 1% TDS is essential for tracking transaction trails and preventing money laundering, making a reduction improbable.
• Loss Set-off Provisions:
• • Industry Demand: Investors seek fairness in allowing VDA losses to be set off against gains, similar to stock market regulations.
  • Government Stance: The “ring-fencing” of VDA losses is intentional to discourage retail participation in volatile assets, suggesting no relaxation in this area.

How Will the Government Approach Crypto Regulation and CBDCs in 2026?

Beyond taxation, the 2026 Budget is expected to reinforce the government’s broader strategy regarding the digital economy and compliance.

• Focus on Compliance: The government aims to formalize the sector by enforcing strict reporting standards. This includes the mandatory disclosure of VDA holdings in the “Schedule VDA” of Income Tax Return (ITR) forms.
• Promotion of Digital Rupee (CBDC): The Reserve Bank of India (RBI) will likely continue to receive policy support to promote the e-Rupee (CBDC) as the only safe, sovereign-backed digital currency, positioning it as a stable alternative to private cryptocurrencies like Bitcoin or Ethereum.
• International Collaboration: Rather than introducing a standalone “Crypto Bill” immediately, India is expected to continue advocating for a globally coordinated regulatory framework, a stance reiterated during its G20 presidency discussions.

Frequently Asked Questions

Will the crypto tax be reduced in the Indian Budget 2026?

It is highly unlikely that the crypto tax will be reduced in the Union Budget 2026-27. Most experts predict that the Finance Ministry will maintain the current flat 30% tax rate on VDA income to discourage speculative trading and ensure revenue stability, despite industry lobbying.

Can I set off crypto losses against gains in India in 2026?

No, under current laws expected to persist through 2026, you cannot set off losses from one virtual digital asset against gains from another. For example, if you lose money on Bitcoin but make a profit on Ripple, you must pay a flat 30% tax on the Ripple profits without deducting the Bitcoin losses.

What is the TDS rate for crypto transfers in India?

The TDS rate for crypto transfers is currently 1% under Section 194S of the Income Tax Act. This is deducted from the total transaction value (consideration) whenever a transfer takes place on an Indian exchange, serving primarily as a transaction tracking mechanism for the government.

Conclusion

As the Indian Union Budget 2026-27 approaches on February 1, 2026, crypto investors should prepare for continuity rather than change. While the industry presents a compelling case for tax rationalization and TDS reduction to curb capital flight, the government’s priority remains strict compliance and the promotion of the Digital Rupee. Consequently, the stringent tax regime—characterized by a 30% flat tax and 1% TDS—is expected to remain the reality for Indian crypto participants for the coming fiscal year.

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