As India prepares for Union Budget 2026, the country’s crypto tax framework is coming under increasing scrutiny following the release of fresh data. For many crypto investors, the tax structure has proven challenging, with notable discrepancies between trading outcomes and actual tax liabilities. A recent report by KoinX, titled India’s Crypto Tax Story 2025, highlights these disparities and sheds light on the burdens faced by Indian traders.
Key Findings from the Report
According to anonymized data from nearly 7 lakh Indian crypto users who traded during FY 2024–25, investor outcomes were split almost evenly between gains and losses. However, even those who ended the financial year with significant losses found themselves paying taxes due to the country’s current tax rules.
One of the standout figures from the report reveals that traders with net capital losses of ₹1,178 crore still paid taxes on ₹180 crore of taxable gains. This highlights a fundamental issue: under existing regulations, crypto losses cannot be offset against gains. This approach contrasts with the treatment of other asset classes, where capital gains tax is levied on net profits rather than isolated trades.
The Impact of 1% TDS on Crypto Transactions
The introduction of a 1% tax deducted at source (TDS) on crypto transactions has also generated significant debate. While the measure has been effective in ensuring transaction-level reporting and compliance, it has had unintended consequences for traders:
- Over 30% of users experienced TDS deductions exceeding their final tax liability, often resulting in refunds.
- Nearly half of TDS-paying users reported net losses by the end of the financial year.
- Trading activity has been highly concentrated, with less than 5% of users accounting for 87% of TDS collections. These active traders often operate on thin margins, and upfront deductions further reduce liquidity and increase costs during periods of market volatility.
Rising Pressure for Reforms
As industry experts anticipate Union Budget 2026, calls for reform are growing. Policymakers face a critical decision: should the tax framework continue to prioritize transaction visibility, or should it evolve to account for net economic outcomes? Key recommendations include:
- Rationalizing TDS rates or thresholds to minimize capital lock-in.
- Allowing loss offsets to align crypto taxation with other asset classes.
- Streamlining the refund process for users with overpaid TDS.
These changes could help foster a healthier trading environment and encourage more widespread crypto adoption in India. However, the broader implications of these decisions will likely impact the future of the virtual digital assets (VDA) ecosystem in the region.
Stay Ahead in the Crypto Space
For crypto investors striving to optimize trading strategies while staying compliant with taxation laws, tools like KoinX can simplify tax calculations and provide accurate reporting. Their platform is designed to help traders navigate the complexities of the current tax regime, ensuring hassle-free compliance.
As the evolving crypto landscape continues to shape discussions around tax policies and investor implications, staying informed is key. By leveraging tools and resources available, traders can make better financial decisions while planning for the future.
