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Enterprises are looking for clear rules on digital assets in order to move blockchain projects beyond pilots and into scale-up.
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The 30% VDA and 1% TDS tax are blamed for shrinking the onshore liquidity and driving trading overseas.
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Leaders have called for lower TDS and loss set-offs as well as higher thresholds in order to protect small investors.
India’s blockchain ecosystem and crypto industry is entering a critical phase. As the Union Budget for 2026-27 nears, the conversation has shifted away from whether crypto should even exist, to how India plans on keeping innovation, capital and jobs within its own borders.
In India, the adoption of blockchain technology has been limited to pilot projects for many years. This phase is now fading. Enterprises are ready for growth, but policy uncertainty continues hold them back.
From Speculation to Core Infrastructure
Blockchain is no more viewed as a tool for trading. Indian companies increasingly view it as digital infrastructure with real-world applications in payments, logistics and identity systems, healthcare and governance, as well as cross-border transactions.
Despite this shift in focus, many enterprise initiatives are still stuck in the testing phase. The main obstacle is not technology but rather unclear rules regarding digital assets, taxation, and compliance. CIOs are unable to approve long-term investment or integrate blockchain into production systems without clarity.
Tax policy is pushing activity offshore
Industry leaders believe that India’s virtual digital assets tax framework, which was introduced in 2022, is the biggest roadblock. A flat 30% tax, no loss set-off and a 1% TDS on every transaction has changed market behavior.
According to Dilip Chanoy, Chairman, Bharat Web3 association, the current design has hurt the domestic platforms more than helped oversight.
“The tax regime does not allow for the set-off of losses, and 1% TDS has lowered onshore liquidity. This has pushed a large portion of trading offshore to platforms that are outside the effective Indian regulatory oversight,” Chenoy stated.
He said that this result runs counter to the original goal of the government, which was to use TDS for transparency and traceability. He said that the TDS has “weakened compliant domestic markets and reduced regulatory transparency”.
Chenoy believes that the Budget 2026-27 will be an opportunity to correct these distortions. “The current tax structure affects the broader Blockchain ecosystem, drives offshore investment, and limits India’s ability to retain innovative growth, employment and accountable growth,” said Chenoy.
Industry pushes for TDS Relief
Ashish Singhal is the co-founder of CoinSwitch and he has called for a drastic reduction in transactional taxation.
Singhal stated that lowering TDS from 1% to just 0.01% on crypto transactions would improve liquidity without compromising the transparency. He also suggested that the TDS threshold be raised to Rs 5 lakh to protect small investors from an adverse impact.
Regulation is mature, but policy must catch up
Since 2022, the oversight has been strengthened. Reporting systems have been implemented, enforcement has improved and tax collection from crypto transactions has steadily increased. Industry voices claim that this is exactly why the original tax model, which was based on deterrence, should be reevaluated.
It is not deregulation that is demanded, but rather balance. India could position itself as an innovation hub for crypto and blockchain technology if it had clear rules, fair taxes, and predictable compliance.
Standing still is a greater risk than moving.
Crypto and blockchain are now mainstream. Institutional capital, stablecoins, and infrastructure are scaling rapidly.
India has the talent, users, and scale needed to compete. Experts say it risks losing relevance.
Budget 2026-27 has become more than a fiscal event for crypto. It is a test to see if India wants to grow its digital asset economy in India or let it grow elsewhere.
Related: Indian crypto investors decry “unfair” tax regime ahead of Union Budget Presentation
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