Tempted by glittering returns of Bitcoin and Ethereum, lack of clarity is holding you back? Will Union Budget 2026 lend some clarity to the crypto framework in India?The Halwa ceremony is now over, final preparations are in place and all eyes are on what Union finance minister Nirmala Sitharaman’s red bahikhata is holding for various sectors. Taxpayers, investors and businesses are watching closely, eager to see what the upcoming Union Budget 2026-2027 brings for them. One of the keen audiences to the Budget will be the Cryptocurrency sector, which has been standing at a critical juncture after the Budget 2025.India has emerged as the world’s largest cryptocurrency market, thanks to widespread grassroots adoption and a strong digital payments ecosystem. A large diaspora relying on remittances, young adults using crypto trading as an additional source of income, and seamless fintech infrastructure such as UPI and eRupi have all contributed to the sector’s rapid expansion, according to Chainanalysis.Between July 2024 and June 2025, the on-chain value received in India rose by 99% compared to the previous year. The country now leads the region in on-chain transaction volume and secured the top position across all sub-indices in the 2025 Global Crypto Adoption Index.This rapid growth has also created an urgent need for a clear regulatory framework for crypto trading. The formal recognition of virtual digital assets in India’s tax system began with the Union Budget 2022–23, marking the first time these assets were explicitly acknowledged. The government highlighted a “phenomenal increase” in both the volume and frequency of crypto transactions, and introduced a dedicated tax regime that imposed a flat 30% tax on income earned from the transfer of virtual digital assets.“No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income. Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient,” Finance Minister Nirmala Sitharaman had said in her Union Budget 2022-23 speech.
What Budget 2025 unfolded for the crypto world?
In last year’s Budget, the Centre spoke of the “Obligation to furnish information in respect of crypto-asset.” While the 30% flat tax on crypto gains and the 1% Tax Deducted at Source (TDS) on transactions, were left untouched, the Finance Bill introduced mechanisms that significantly widened the state’s scope to monitor crypto activity. This reporting of crypto assets will be in effect from April 1, 2026.For India’s large number of crypto investors, the message was unambiguous: disclosure is no longer optional.One of the most important measures was the introduction of Section 285BAA, which brought crypto exchanges, wallet providers and intermediaries under a mandatory reporting framework similar to banks and financial institutions. These entities are now required to submit periodic statements of financial transactions to the Income Tax Department, detailing user activity and transaction values.“Sub-section (1) of section 285BAA of the Act states any person, being a reporting entity, as may be prescribed, in respect of crypto asset, shall furnish information in respect of a transaction in such crypto asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as may be prescribed,” the Budget document read.A wider net for emerging digital assetsThe government also expanded the definition of VDAs under Section 2(47A), ensuring that any asset based on cryptographically secured distributed ledger technology falls within the tax net. This change future-proofed the law against emerging technologies such as decentralised finance (DeFi) instruments, specialised NFTs and newer token formats that previously existed in regulatory grey zones.Crypto as undisclosed income: A high-stakes shiftPerhaps the sector’s highlight of Budget 2025 was the inclusion of cryptocurrencies within the ambit of search and seizure provisions. For the first time, undisclosed VDAs were explicitly placed on par with unexplained cash, bullion or jewellery.Under the amended provisions, from February 1, 2025, if undisclosed crypto holdings were detected during a tax search, they are subjected to tax at an effective rate of 60%, including surcharge and penalty. This move effectively erased most of the asset’s value. The change dramatically raised the stakes for non-compliance, transforming crypto from a speculative risk into a serious tax liability if left unreported.In short, the Budget 2025 tightened the noose for crypto traders:
- The 30% flat tax on gains continues, regardless of income slab or holding period
- The 1% TDS remains in place, acting as a transaction-level tracking tool
- Loss set-off remains prohibited, forcing investors to pay tax on profits while absorbing losses independently
The result is a compliance-heavy regime that prioritises tracing the digital asset. Every crypto trade today leaves a digital trail straight to the tax department.But before that, on February 1, Nirmala Sitharaman will be presenting her ninth consecutive Budget in the Parliament. With the regulatory infrastructure now more regulated than before, experts believe Budget 2026 could become a turning point. Tax experts interviewed in a Times of India Online survey have urged the Centre for greater clarity and consistency in cryptocurrency taxation, though expectations of meaningful relief remain mixed.
Here’s what experts are hoping the upcoming Budget 2026 for:
Guidelines could enhance predictabilitySurabhi Marwah, Tax Partner at EY India, highlighted that the incoming Budget presents an opportunity to bring much-needed clarity to the taxation of virtual digital assets, especially in areas such as loss treatment, cross-category transactions and compliance processes. “Such guidance would enhance predictability for taxpayers while supporting market development and compliance,” she told TOI.Marwah also cited global practices, countries like the US and UK treat cryptocurrencies within the capital gains framework, allowing loss set-offs similar to other financial assets. Introducing “clear and well-scoped rules” in India, she adds, could help reduce ambiguity without changing the government’s broader policy approach.Resolving grey areasRavi Jain, Partner at Vialto Partners, pointed at the absence of nuanced tax rules emerging as a key pain point. “The absence of clear and nuanced tax rules on crypto assets is a growing concern for investors, exchanges, and tax administrators. While the current framework—anchored around a flat 30% tax and TDS on transfers—has brought crypto into the tax net, it leaves several grey areas unresolved,” the expert told TOI.Issues such as asset classification, treatment of losses and cost-basis calculation continue to remain ambiguous, increasing compliance costs, fuelling litigation and discouraging legitimate participation in the ecosystem. Pointing to the disparity with other asset classes, Jain noted that long-term foreign shares are taxed at 12.5% with loss set-off permitted, while countries such as the US and UK treat cryptocurrencies as capital assets and tax gains based on holding periods.In Budget 2026, he said, the government has an opportunity to shift from a “deterrence-based approach” to a “clarity-driven tax framework,” with clear definitions, capital-gains-aligned treatment and streamlined reporting norms to improve compliance.India’s already at top — but a clearer framework is neededRadhika Viswanathan, executive director at Deloitte India, pointed out that India already ranks among the world’s leading markets for cryptocurrency adoption, but the sector now needs regulatory clarity and tax reforms to regain momentum. “The existing tax framework on virtual digital assets marked by a flat tax rate of 30%, TDS of 1%, no off-setting of losses against gains and lack of regulatory framework has significantly deterred the sector’s full potential in terms of trading and market development,” she told TOI.According to her, industry stakeholders are seeking a structured regulatory roadmap in Budget 2026 and are pushing for a review of the 2022 tax measures, including a reduction in TDS to 0.01% and a reassessment of the 30% gains tax to boost investor confidence and revive domestic trading.Clarity on to calculate the incomeParizad Sirwalla, partner and head of Global Mobility Services (Tax) at KPMG in India, said that clarity is specifically needed on the method of computing income from cryptocurrency transactions and the applicable rate of taxation. She explained that a framework which classifies crypto income under the appropriate head such as capital gains or income from other sources, based on factors like transaction nature, volume and taxpayer profile would provide greater certainty to stakeholders. Sirwalla added that some concession in allowing slab-rate taxation, instead of the current flat 30% rate, is also a key expectation across the industry.
No relaxation in Budget 2026?
Offering a more cautious view, Tanu Gupta, partner at Mainstay Tax Advisors LLP, says cryptocurrencies are currently taxed as virtual digital assets at the highest and most aggressive rates. Given the government’s policy approach, she believes it is unlikely that Budget 2026 will bring any relaxation in crypto taxation. Gupta adds that in cases of interpretational ambiguity, outcomes are more likely to favour the tax department rather than taxpayers, reinforcing the compliance-heavy nature of the current regime.Richa Sawhney, partner of tax at Grant Thornton Bharat, said that the government has consistently emphasised the need for global coordination on cryptocurrency regulation and taxation. While there has been some progress globally, she notes that several concerns remain unresolved. As a result, despite a long wishlist from taxpayers and industry participants, Sawhney cautions that any big tax relief for cryptocurrencies may still be some distance away.