Budget 2026: Will India Keep Crypto Innovation at Home or Push It Away?

India’s blockchain and crypto ecosystem is moving into a decisive phase. As the Union Budget 2026–27 approaches, the conversation has shifted from whether crypto should exist to how India plans to keep innovation, capital, and jobs within its borders.

For years, blockchain adoption in India remained limited to pilot projects. That phase is now fading. Enterprises are ready to scale, but policy uncertainty continues to hold them back.

From Speculation to Core Infrastructure

Blockchain is no longer viewed only as a trading tool. Indian companies increasingly see it as digital infrastructure, with real-world use cases in payments, logistics, identity systems, healthcare, governance, and cross-border transactions.

Despite this shift, many enterprise initiatives remain stuck in testing mode. The main hurdle is not technology, but unclear rules around digital assets, compliance, and taxation. Without clarity, CIOs struggle to approve long-term investments or move blockchain into production systems.

Tax Policy Is Pushing Activity Offshore

Industry leaders say the biggest roadblock remains India’s virtual digital asset tax framework, introduced in 2022. A flat 30% tax on gains, no loss set-off, and a 1% tax deducted at source (TDS) on every transaction have reshaped market behavior.

According to Dilip Chenoy, Chairman of the Bharat Web3 Association, the current design has hurt domestic platforms more than it has helped oversight.

“The tax regime offers no provision for loss set-off, and the 1% TDS has reduced onshore liquidity while pushing a large share of trading to offshore platforms outside effective Indian regulatory oversight,” Chenoy said.

He added that this outcome runs counter to the government’s original goal of using TDS for traceability and transparency. “It has weakened compliant domestic exchanges and reduced regulatory visibility,” he said.

Chenoy sees Budget 2026–27 as a chance to correct these distortions. “The current tax design affects the broader blockchain ecosystem, drives investment offshore, and limits India’s ability to retain innovation, employment, and accountable growth,” he said.

Industry Pushes for TDS Relief

Ashish Singhal, Co-founder of CoinSwitch, is calling for a sharp reduction in transaction-level taxation.

Singhal said that lowering TDS on crypto transactions from 1% to 0.01% would significantly improve liquidity without compromising transparency. He also suggested raising the TDS threshold to ₹5 lakh to shield small investors from disproportionate impact.

Regulation Has Matured, Policy Must Catch Up

Since 2022, oversight has strengthened. Reporting systems are in place, enforcement has improved, and tax collections from crypto transactions have grown steadily. This, industry voices say, is precisely why the original deterrence-focused tax model should now be reassessed.

The demand is not for deregulation, but for balance. Clear rules, fair taxation, and predictable compliance would allow India to position itself as a hub for compliant crypto and blockchain innovation.

The Bigger Risk Is Standing Still

Globally, crypto and blockchain have moved into the mainstream. Institutional capital is flowing in, stablecoins are processing trillions of dollars, and infrastructure is scaling rapidly.

India has the users, talent, and scale to compete. Experts say that it risks losing its relevance.

Budget 2026–27 is no longer just a fiscal event for the crypto sector. It is a test of whether India wants to build its digital asset economy at home or watch it grow elsewhere.

Related: Indian Crypto Investors Decry “Unfair” Tax Regime Ahead of Union Budget Presentation