India’s cryptocurrency sector makes urgent pre-budget demands for 1% TDS rationalisation to 0.01%, loss set-off permissions, and SEBI-led regulation framework as ₹40,000 crore cumulative tax leakage looms over next 5 years due to offshore migration. Industry leaders warn 30% flat tax + restrictive TDS drives billions offshore despite India’s global crypto adoption leadership.
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4-Year Tax Regime Triggers Mass Exodus
Budget 2022 VDA framework (Sections 115BBH, 194S) imposes 30% flat gains tax + 1% TDS with no loss set-offs, creating world’s harshest crypto regime. Tax India Online projects ₹40,000 crore unreported TDS by 2030 as users flock to Dubai/Singapore exchanges evading Indian compliance.
ZebPay COO Raj Karkara: “1% TDS kills liquidity—reduce to 0.01% for monitoring while enabling onshore participation. Clear SEBI framework builds investor trust.” Delta Exchange CEO Pankaj Balani demands “Make in India” crypto policy matching grassroots adoption momentum.
SEBI-RBI Framework Discussions Gain Momentum
Ministry of Finance engages SEBI-RBI for comprehensive crypto regulation ahead of Budget 2026-27. Proposed structure:
- SEBI: Exchange registration, investor protection, KYC/AML oversight
- RBI: FDI controls, cross-border flows, capital account management
- Mandatory SEBI registration aligns with OECD standards, curbs illicit activity
Binance APAC Head SB Seker: “India’s digital economy demands VDA framework protecting users while supporting responsible growth.” Uniform TDS implementation across exchanges could boost compliance, eliminate offshore competitive distortion.
Onshore Liquidity Revival: Industry’s 5-Point Agenda
Crypto platforms present Budget 2026 reform matrix:
2. Loss set-off: Enable VDA losses against VDA gains
3. SEBI registration: Legitimise compliant platforms
4. Reporting standards: Boost investor confidence
5. AML/KYC enforcement: Target unauthorised operators
Nischal Shetty (WazirX) warns survey actions against global platforms reveal crores in unreported TDS falling on end-users. Domestic exchanges suffer as offshore players bypass Indian tax regime entirely.
Global Leadership vs Domestic Strangulation
India ranks #1 global crypto adoption (Chainalysis 2025) yet trades offshore due to punitive taxation. Budget 2026 opportunity: Position India as Web3 leader through pragmatic reforms balancing innovation + oversight.
Industry consensus: Lower TDS + loss set-offs revive onshore liquidity. SEBI oversight legitimises compliant platforms while crushing unauthorised operators. PMLA compliance proven—regulation + innovation coexist successfully.
Finance Ministry sources confirm pre-budget consultations intensified post-Taxology India revelation of SEBI-RBI framework discussions. Union Budget presentation (Feb 1, 2026) emerges as crypto policy inflection point.
