** India Cryptocurrency Sector – Pre-Budget 2026 Outlook** **Executive Summary** As the Union Budget 2026 approaches, the Indian cryptocurrency and Web3 sector is advocating for critical regulatory and fiscal reforms. Industry stakeholders are emphasizing the need for tax rationalisation to restore market liquidity, ensure compliance, and foster a robust domestic ecosystem. **Key Industry Demands** * **Tax Rationalisation:** The primary appeal is for relief from the current stringent tax regime, specifically: * **Reduction of 1% TDS:** Stakeholders argue that the 1% Tax Deducted at Source (TDS) on transfers has severely impacted trading volumes and liquidity. A reduction is sought to revive market activity. * **Revision of 30% Flat Tax:** The industry is seeking a reconsideration of the flat 30% tax on income from virtual digital assets, aiming for a structure more aligned with other asset classes. * **Regulatory Clarity:** Beyond taxation, there is a strong demand for a clear, comprehensive regulatory framework. This is viewed as essential for building investor confidence and discouraging the migration of talent and capital to offshore jurisdictions. **Strategic Implications** Addressing these demands is projected to have the following impacts: 1. **Enhanced Liquidity & Compliance:** Lower tax barriers are expected to bring trading volumes back to domestic exchanges, thereby improving oversight and tax compliance. 2. **Ecosystem Growth:** A supportive regulatory environment will catalyze the growth of India’s Web3 sector, encouraging innovation and retaining domestic talent. 3. **Investor Confidence:** Clear regulations will mitigate uncertainty, attracting both retail and institutional investment into the Indian market.