Mark your calendars for February 1, 2026. That’s when Indian Finance Minister Nirmala Sitharaman stands up in parliament to present India’s Union Budget 2026, and the entire crypto community will be watching.
Will this be the year India finally eases up on crypto in the budget? Right now, the country has what many consider the world’s most punishing tax rules for digital assets. Back in 2022, the government rolled out these heavy taxes. Local crypto exchanges basically collapsed overnight, and traders moved to offshore platforms where the rules are friendlier.
What Are VDAs?
VDA stands for Virtual Digital Assets. It’s basically the government’s fancy name for crypto and NFTs. When the Finance Act of 2022 came out, this is what they called everything from Bitcoin to those digital art pieces people were going crazy over.
The definition covers pretty much any digital token or code you can swap for real money. But it doesn’t include actual rupees or currencies backed by central banks. Just the digital stuff.
Also Read: 5 Crypto Tax-Free Countries in 2025 You Can Move to for Zero Crypto Taxes
Current Indian Crypto Taxation
Alright, let me break down what crypto investors are dealing with right now. Sold some Bitcoin for profit? You’re paying 30% flat tax, plus extra charges. Doesn’t matter if you bought it yesterday or held it for five years.
Then there’s this 1% TDS that hits almost every crypto transaction. For people who trade frequently or work with small profit margins, this TDS is basically killing their trades. A lot of them just said forget it and moved to foreign platforms.
And here’s the worst part. Lost money on one coin? Made money on another? You can’t balance them out. The tax man only cares about your wins, not your losses.
The government’s actually collecting decent money from this. They pulled in ₹269 crore in FY23, then ₹437 crore in FY24. TDS alone crossed ₹500 crore in FY25. So yeah, crypto activity in India is definitely real, even with all these restrictions.
What’s the Industry Asking For?
The crypto exchanges aren’t making crazy demands. Top priority? Get that 1% TDS down to something reasonable, like 0.01% or 0.1%.
Edul Patel from Mudrex keeps pushing for loss offsetting. Stocks work this way. Mutual funds work this way. Why not crypto?
Then there’s talk about fixing the 30% flat tax in Budget 2026. Some folks think it should work like regular income tax slabs. Others want it treated like stock market gains. Right now, whether you’re a college kid trying out crypto with pocket money or a serious investor, everyone pays the same crazy rate.
CoinDCX’s Sumit Gupta has been pushing hard for reforms. The industry doesn’t just want tax relief. They’re after a proper Crypto Bill and SEBI oversight.
Also Read: Cryptocurrency Tax Explained: Key Insights on India’s 30% Tax and TDS Rules
Will Budget 2026 Actually Change Anything?
Here’s the thing, though. Don’t hold your breath for massive tax cuts in Budget 2026. The government has never liked crypto much. They keep comparing it to gambling, not investing. So don’t expect them to suddenly change their tune.
Best case scenario? We might see minor adjustments. Think higher TDS limits, better documentation processes, and maybe some departments actually talking to each other. Nothing dramatic.
But there’s a bigger problem the government needs to face. Right now, Indian crypto traders are just moving their money offshore. They’re using VPNs, foreign exchanges, whatever it takes to avoid these taxes. That means all this activity is happening completely outside India’s regulatory framework.
Between late 2024 and 2025, Indians pumped around ₹5 lakh crore into offshore crypto platforms. That’s massive money flowing out, invisible to tax authorities.
All this economic activity is happening in the shadows, way beyond the KYC and anti-money laundering rules India spent years building.
We’ll know on February 1 which way this goes. Most people in the crypto space aren’t expecting miracles. They’d just settle for the government admitting the current system is pushing everyone offshore and maybe, just maybe, doing something about it.
What exactly are Virtual Digital Assets?
VDAs are basically any digital code or token that has value and can be traded or exchanged. Think cryptocurrencies like Bitcoin, NFTs, tokens – anything digital that people buy and sell. Regular currencies like rupees don’t count though. The government uses this umbrella term to cover the whole crypto world.
Also Read: India Leads Worldwide Crypto Adoption: Outpacing China & US
What’s the current tax on crypto profits?
Right now, you’re paying 30% flat on any profit from crypto. Doesn’t matter if you held it for a week or a year. Plus you’ll pay some extra surcharge and cess on top. And here’s the kicker – you don’t get any benefits for long-term holding like you do with stocks.
Can I write off my crypto losses?
Nope. If you lost money on some coins, that’s your problem. You can’t use those losses to reduce your tax bill from other crypto gains or any other income. The losses just disappear. They’re what tax people call “ring-fenced” – basically locked away and useless for tax purposes.
How does the 1% TDS work on crypto?
Every time you make a crypto transaction above certain limits, 1% gets deducted upfront. If you’re a regular person and the transaction is over ₹50,000, or ₹10,000 for certain specified entities, the TDS kicks in. This happens whether you made a profit or not.
Do I pay tax on mining or free airdrops?
Yeah, you do. Mining gets taxed at 30% on whatever the crypto is worth when you mine it. Since you didn’t pay anything to get it, the entire value is your profit. Same deal with airdrops – 30% tax on the fair market value when you receive them. That value then becomes your cost basis if you sell later.
Will Budget 2026 actually fix these tax issues?
Honestly, probably not much. The industry is pushing for lower TDS rates, higher transaction limits before TDS applies, and the ability to offset losses. But most experts think the government will stick with the tough approach. Maybe some minor tweaks to compliance rules, but don’t expect major tax cuts.
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Disclaimer:
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