Ahead of Union Budget 2026, KoinX Report Flags Disconnect Between Crypto Trading Outcomes and Tax Liabilities

India, 31 January 2026 - As India prepares for the Union Budget 2026, the domestic crypto industry is seeking a more outcome-aligned tax framework, including rationalisation of the 30% capital gains tax, allowance for loss offsets, and a re-evaluation of the 1% tax deducted at source (TDS).

These recommendations are strongly supported by India's Crypto Tax Story 2025, the annual report released by KoinX, a crypto taxation and portfolio-tracking platform. Based on anonymised data from nearly 7 lakh Indian users with crypto transactions in FY 2024-25, the report provides a data-led assessment of how current tax rules translate into real investor outcomes.

The report finds that while the current 1% TDS has strengthened transaction-level reporting and compliance, it has also resulted in significant capital lock-in due to upfront deductions. Since TDS is applied to every transaction irrespective of gains or losses, it effectively operates as a volume-based compliance mechanism rather than a profit-linked tax, leading to widespread refund dependency.

Commenting on the findings, Punit Agarwal, Founder & CEO, KoinX, said: "TDS serves primarily as a reporting mechanism to enhance compliance and transaction visibility, not as a tax or financial burden-excess amounts are simply refunded at ITR filing, proving it budget-neutral in the end. We strongly advocate reducing the rate to 0.1% across the entire industry to unlock capital tied up in upfront deductions, especially for high-frequency traders who drive the bulk of volumes yet face refunds in over 30% of cases. This uniform cut would ease liquidity strains, curb shifts to offshore platforms, and preserve reporting efficacy without diluting oversight."

Key TDS Findings (FY 2024-25)
- Total TDS collected across the crypto ecosystem: ₹511.83 crore
- Contribution from KoinX users: ₹130.16 crore (25.43%)
- Actual tax payable by these users: ₹91.64 crore
- Estimated excess TDS / refunds: ₹38.52 crore
Additional insights show that:
- Over 30% of TDS deducted exceeded users' final tax liability
- Nearly half of TDS-paying users ended the year with net capital losses
- Less than 5% of traders accounted for 87% of total TDS collections

This skew indicates that while high-activity traders contribute a disproportionate share of TDS, thin trading margins mean both active and retail participants face liquidity constraints, albeit at different scales.

Capital Gains: Profits and Losses Tell a Different Story
On capital gains, the report highlights a sharper misalignment between trading outcomes and tax liability. Investor results in FY 2024-25 were almost evenly split:
- 50.91% of users reported net capital gains
- 49.09% reported net capital losses

Despite this, profitable users reported net gains of ₹2,861 crore, while taxable capital gains rose to ₹3,722 crore due to restrictions on loss offsets.

At the same time, users who incurred net capital losses of ₹1,178 crore still paid tax on ₹180 crore of taxable gains, as current rules do not permit losses to be set off. This resulted in tax liabilities even among investors who ended the year in overall losses.

"Nearly half of investors reported net losses, yet paid tax on isolated gains due to blocked loss offsets. No net gain means no capital gains tax-this is a foundational principle across asset classes. Denying this for crypto distorts incentives, erodes fairness, and risks pushing activity offshore," Agarwal added.

Budget 2026 Implications
Through India's Crypto Tax Story 2025, KoinX aims to provide policymakers and stakeholders with empirical inputs to evaluate capital gains rationalisation, loss-offset provisions, and the design of compliance mechanisms.

Ahead of the Union Budget 2026, the findings underscore the need to balance revenue considerations with capital efficiency, tax neutrality, and administrative simplicity, particularly as retail participation in digital assets continues to expand.

Detailed report: https://www.koinx.com/crypto-tax-insights-report/india/2025

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KoinX is an India-based automated cryptocurrency tax and accounting platform founded in 2022 by Punit Agarwal. It helps investors and businesses in 100+ countries calculate capital gains, manage portfolios, and generate audit-ready reports by integrating with 800+ exchanges and wallets. KoinX simplifies compliance for digital assets, supporting over 25,000+ assets.

This release was published on openPR.