India Maintains 30% Crypto Tax, Rejects Industry Pleas Amid Market Fear

VADODARA, February 2, 2026 — India's government has formally rejected industry appeals for tax relief, embedding its existing cryptocurrency tax framework into the 2026-2027 fiscal budget. This daily crypto analysis reveals a 30% capital gains tax on crypto assets and a 1% Tax Deducted at Source (TDS) on transactions will remain unchanged. Consequently, the regulatory stance solidifies as penalties for non-compliance escalate, with daily fines of 200 rupees for improper reporting and 50,000 rupees for false declarations effective April 1.

Investigation: India's Regulatory Hardening and Budgetary Lock-In

According to Cointelegraph, India's Ministry of Finance included the current crypto tax structure in its official budget documentation. The framework imposes a flat 30% tax on crypto capital gains, disregolding loss offset provisions common in traditional equities. , the 1% TDS on every transaction creates a liquidity friction point, directly impacting high-frequency trading and arbitrage strategies. Market structure suggests this TDS acts as a persistent sell pressure, akin to a built-in liquidation mechanism.

Penalties for transaction reporting failures see a significant hike. Starting April 1, 2026, entities face a daily fine of 200 rupees for inadequate reporting. False declarations incur a one-time penalty of 50,000 rupees. This move aligns with global regulatory trends emphasizing transparency, as seen in recent actions by bodies like the U.S. Securities and Exchange Commission. The decision follows months of lobbying by Indian crypto exchanges and industry bodies pleading for reduced rates to foster innovation.

Market Context & Historical Precedent

Historically, India's crypto tax regime, introduced in 2022, precipitated a massive migration of trading volume to offshore platforms. On-chain data from Etherscan indicates a 70% drop in India-sourced Ethereum transactions post-TDS implementation. Underlying this trend is a classic liquidity grab, where capital seeks paths of least resistance. In contrast, jurisdictions like Singapore have adopted more nuanced frameworks, attracting displaced capital.

This regulatory hardening occurs against a backdrop of global market stress. For instance, the recent broad market sell-off saw Bitcoin plunge to multi-month lows, exacerbating fear. Relatedly, the FTC probe into Upbit operator Dunamu highlights increasing regulatory scrutiny worldwide. These parallel developments suggest a coordinated shift toward stricter oversight, impacting retail and institutional behavior alike.

Technical Architecture & Price Action

Market structure currently shows Bitcoin trading at $75,131, down 4.30% in 24 hours. This price sits near a critical Fibonacci 0.618 retracement level from the 2025 high, a zone often scrutinized for institutional accumulation. The 1% TDS in India functionally creates a micro-structural headwind, equivalent to a 100-basis-point transaction cost that distorts local order books. Consequently, Indian exchanges exhibit wider bid-ask spreads compared to global peers.

Volume profile analysis indicates suppressed activity on Indian platforms since the TDS inception. A Fair Value Gap (FVG) exists between offshore and onshore prices for major assets, often arbitraged by sophisticated players bearing the tax cost. The Reserve Bank of India's historical skepticism toward crypto, documented in past policy papers, reinforces this structural impediment. This regulatory friction directly contradicts the permissionless ethos of blockchain networks like Ethereum, whose official documentation emphasizes open access.

By The Numbers

Why It Matters

India's decision matters because it cements a high-cost environment for crypto activity in one of the world's largest potential markets. Institutional liquidity cycles typically avoid jurisdictions with punitive tax structures. Consequently, capital allocation may shift further to regions with clearer, friendlier regulations. Retail market structure in India will likely continue to fragment, with informal OTC markets growing to circumvent TDS.

This policy also sets a precedent for other emerging economies weighing crypto taxation. Nations observing India's revenue retention versus innovation trade-off may emulate its model. The increased penalties signal a zero-tolerance approach to non-compliance, pushing exchanges toward heavier surveillance infrastructure. This aligns with global financial integrity standards but may stifle grassroots adoption.

Expert Commentary

Market structure suggests India's tax framework acts as a permanent liquidity sink. The 1% TDS creates a structural sell pressure that must be absorbed by market makers, widening spreads and reducing efficiency. In a climate of Extreme Fear, such friction exacerbates downward volatility, as seen in the recent Bitcoin break below $76,000. For the 5-year horizon, this policy may institutionalize India as a crypto exporter rather than an innovator.

Market Outlook & Price Scenarios

Two data-backed technical scenarios emerge from current market structure. First, a consolidation scenario where Bitcoin holds above $75,000, absorbing selling pressure from tax-induced liquidations. Second, a breakdown scenario where failure at this support triggers a cascade toward $70,000, the next major order block. The 12-month institutional outlook remains cautious, with India's policy contributing to a fragmented global regulatory .

• Bullish Invalidation Level: $78,500. A sustained break above this resistance, confirmed by rising volume, would negate the immediate bearish structure and suggest institutional accumulation overcoming tax fears.
• Bearish Invalidation Level: $73,800. A daily close below this support, especially on high volume, would confirm a breakdown, likely triggering further sell-offs in assets with high Indian exposure.

Over the next 12 months, institutional capital may increasingly bypass India for friendlier jurisdictions. However, if global regulatory harmonization advances, as hinted in recent DAO governance proposals, pressure for reform could resurge. The 5-year horizon depends on whether India prioritizes revenue or innovation in its digital asset strategy.