India’s aggressive taxation framework for digital assets is increasingly being linked to a migration of trading activity beyond its borders. Estimates referenced by NS3.AI indicate that nearly three-quarters of crypto volume associated with Indian users now flows through offshore platforms, contributing to a measurable slowdown in activity on domestic exchanges.
With the 2026 Union Budget on the horizon, pressure is mounting on policymakers to recalibrate the current structure. Market participants are particularly focused on the Tax Deducted at Source (TDS), which many argue constrains liquidity, as well as rules that currently prevent traders from offsetting losses — a limitation seen as out of step with treatment across most financial markets.
Industry bodies are urging the government to pursue a more proportionate approach that protects investors while keeping the local ecosystem competitive. A clearer and more balanced framework could help restore confidence, encourage responsible innovation, and improve transparency by drawing trading activity back into regulated channels rather than allowing it to remain dispersed across jurisdictions.
