The Bharat Web3 Association (BWA) met India’s Finance Ministry this week and formally submitted its roadmap for the 2026 Budget, putting crypto taxation at the center of the discussion. The group said nearly $42 billion in trading volume has moved to offshore exchanges since the tougher 2022 tax rules took effect.
As of January 7, 2026, the global crypto market capitalization stood at about $3.30 trillion, while domestic firms in India continued to operate under a 30% tax and a 1% tax deducted at source, or TDS. According to the association, that structure has been draining liquidity from the local market and making high-frequency trading and professional market making harder to sustain.
Budget asks focus on tax relief and banking clarity
BWA’s submission is built around three main requests. The first is a sharp reduction in the 1% TDS to 0.01%. The industry’s position is that the current rate does more than collect tax; it ties up trading capital and raises friction for compliant market activity on regulated platforms.
The second request is to let virtual digital assets, or VDAs, use a profit-and-loss treatment closer to stocks or real estate. Under the current framework, Indian crypto investors cannot offset losses in one token against gains in another. BWA wants that rule changed.
The third request concerns formal banking access. Even after the Supreme Court’s 2020 ruling, many startups linked to the association still face what BWA describes as “shadow bans” from major commercial banks. The group has asked the Reserve Bank of India for clearer circulars so that legitimate FIU-registered businesses are not cut off from the banking system.
Capital flight and developer concentration remain central concerns
BWA Chairperson Dilip Chenoy has linked the issue to talent and capital outflows. India is home to more than 1,200 BWA startups and about 17% of the world’s blockchain developers, based on figures cited in the proposal. The association argues that without taxation it considers fair and predictable, startup capital will keep shifting to jurisdictions such as Dubai and Singapore.
The government has still collected sizable revenue under the current regime. In the last financial year, crypto tax collections crossed ₹437 Cr. BWA’s case is that lower tax friction could lift overall tax intake by drawing users back from offshore venues to regulated Indian exchanges, including domestic platforms such as CoinDCX.
The debate remains centered on India’s existing 30% tax plus 1% TDS structure. For local crypto businesses, whether the 2026 Budget changes the TDS rate is now one of the clearest policy signals to watch.