India’s Web3 industry pins hopes on Union Budget 2025-2026

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Indian Finance Minister Nirmala Sitharaman will present the Union Budget for the 2025-26 fiscal year on February 1, 2025. This marks her eighth consecutive budget presentation, continuing the tradition of releasing the annual financial statement on the first day of February.

India’s digital asset community is hoping for a more favorable regulatory framework. The current policy, with a 30% tax on profits and a 1% Tax Deducted at Source (TDS) on transactions, has dampened digital currency markets and pushed traders to offshore platforms, reducing liquidity and momentum.

This year’s budget is especially significant as India’s digital asset exchanges are likely looking at consolidation in 2025, with smaller exchanges either shutting down operations or merging with larger ones due to the country’s punishing taxation regime.

“The Union Budget 2025 is on the horizon, and India’s cryptocurrency community is holding its breath, eagerly awaiting a glimmer of hope in the regulatory framework. The current policy landscape has cast a pall over the once-thriving crypto markets,” Raj Kapoor, founder of India Blockchain Alliance (IBA), told CoinGeek.

Industry leaders are calling for reducing the TDS rate to 0.01% and for treating digital currencies like other asset classes, allowing for loss offsets and carry-forward mechanisms. These changes could restore liquidity, attract global players, and strengthen India’s role in the blockchain space.

“The Web3 ecosystem, with its decentralized platforms and applications, holds transformative potential for India’s digital economy. However, its growth has been impeded by existing tax structures and regulatory ambiguities,” pointed out Amit Kumar Gupta, a legal practitioner at the Supreme Court of India.

“Clear and progressive regulatory frameworks are essential to foster growth in the Web3 space. Providing explicit guidelines can reduce uncertainty, encourage compliance, and attract both domestic and international investments,” Gupta told CoinGeek.

India is expected to lose $1.2 trillion in trade volume on domestic digital asset exchanges in the coming years, according to the Esya Centre, an Indian policy think tank. The study also highlights that harsh tax measures have driven $3.85 billion to foreign digital asset trading platforms as traders seek to avoid the heavy tax burden in India.

With global innovation hubs on the rise, India risks falling behind if it maintains its cautious approach. The question remains: Will the government embrace bold reforms in this year’s Budget, or will it continue with slow, incremental changes for the Web3 industry?

“It’s high time to adopt a clean mix of policies that seamlessly integrate visionary regulation with bold incentives. Regulatory clarity is the foundation of innovation…opaque policies breed fear, but clear, comprehensive frameworks that define legal boundaries for cryptocurrencies, tokenized assets, and decentralized finance (DeFi) will bring in a new world of innovation,” Kapoor said.

“As blockchain transforms industries from finance to logistics, those that embrace its potential today will wield the competitive edge tomorrow. It’s not just about keeping pace with change—it’s about leading the charge and reshaping the rules of global commerce,” Kapoor added.

Recommendations for Indian startups

Nasscom, India’s top IT industry association, has urged reforms in this budget to bolster the nation’s IT and startup sectors.

“We have requested to implement a range of ease of doing measures to significantly boost competitiveness for IT-BPM (business process management), e-commerce and startups. These measures should boost efficiency for the broader industry,” Nasscom said.

The industry body has proposed the establishment of a central DeepTech fund and creating a grant framework to support the DeepTech ecosystem. It also recommends providing equity funding for early-stage DeepTech startups through a dedicated fund.

Nasscom highlights that DeepTech startups are at the forefront of innovation, utilizing advancements in science and engineering to address complex, real-world challenges. These startups focus on technologies such as artificial intelligence, the Internet of Things (IoT), blockchain, quantum computing, advanced materials, biotechnology, and more.

India is home to over 3,600 DeepTech startups, which make up about 12 percent of the country’s total startup ecosystem, according to Nasscom.

“The emergence of 211 new healthcare startups and the adoption of artificial intelligence and machine learning by 4,000 startups have driven a remarkable 28.03% growth in health-tech investments over the past year,” Harshit Jain, founder and global chief executive of Doceree, said in an emailed statement.

“This momentum underscores the need for the upcoming Budget to focus on expanding India’s health-tech startup ecosystem through substantial tax relief and targeted incentives to empower practicing and aspiring healthcare entrepreneurs to further amplify the benefits of ongoing government initiatives for healthcare like the Ayushman Bharat Digital Mission,” Jain added.

Doceree uses AI, machine learning, and behavioral science to create a connected healthcare ecosystem.

Additionally, prioritizing the creation of a dedicated financial pool for technology-driven solutions is essential to accelerate drug research and development, improve patient outcomes, and lower clinical trial costs. According to Jain, allocating resources for healthcare data management to enhance digital adoption across the sector can pave the way for more personalized and accessible healthcare, benefiting millions of underserved citizens while solidifying India’s position as a global leader in healthtech innovation. 

“To position India as a global leader in decentralized finance and digital identity solutions, there’s a call for policies that incentivize innovation. This includes subsidies or tax breaks for blockchain and Web3 startups, which would encourage entrepreneurship and attract investment in the sector,” Gupta pointed out.

E-commerce

“With the evolving e-commerce industry, companies face unique challenges related to marketplace models, inventory management, digital payments, and multi-channel sales structures, making regulatory clarity essential for their growth and compliance,” Nasscom said in its suggestions for pre-Budget memorandum 2025-26.

“The resolution of these issues is particularly important as e-commerce companies navigate complex scenarios involving multiple stakeholders, including sellers, buyers, logistics partners, etc., with their own regulatory and compliance requirements,” the industry body added.

The Indian e-commerce industry is expected to cross $350 billion by 2030, India’s Economic Survey 2023-24 said in July last year. India’s e-commerce market has grown significantly in recent years, driven by technological advancements, emerging business models, and government initiatives like the Digital India program and Unified Payments Interface (UPI). However, data privacy concerns and the rise in online fraud have become major obstacles to further growth in the sector.

In last year’s budget, the finance minister announced the creation of e-commerce export hubs through a public-private partnership (PPP) model aimed at helping micro, small, and medium enterprises (MSMEs) and traditional artisans sell their products internationally. These hubs will operate within a streamlined regulatory and logistical framework, offering trade and export services under one roof.

Additionally, the tax deducted at source (TDS) for e-commerce operators was lowered from 1% to 0.1%.

Take a cue from other countries?

“America is doubling down on crypto! More important than ever for India to react fast,” Sumit Gupta, co-founder of CoinDCX, wrote on X. In July 2024, CoinDCX, India’s first digital currency unicorn, listed the BSV token for trading on its platform, allowing users to have more ways to buy, sell, and trade BSV.

On January 23, U.S. President Donald Trump signed an executive order titled “Strengthening American Leadership in Digital Financial Technology.” The order outlines the administration’s approach to blockchain and digital financial technologies over the next four years. Trump has announced the establishment of a Presidential Working Group on digital asset markets as well as the promotion of dollar-backed stablecoins.

As Trump’s second presidential term is full of support for digital currencies, Indian digital asset exchanges and the Web3 industry are hoping it will influence the Indian government to adopt a liberal stance on digital assets.

And not just the United States. Singapore’s Payment Services Act has cautiously transformed the city-state into a crypto hub, nurturing hundreds of startups while ensuring investor protection.

“Singapore now accounts for 4.37% of global blockchain venture funding, demonstrating how progressive regulations attract capital,” Kapoor pointed out.

“Capital gains tax exemptions on crypto investments or reduced corporate taxes for blockchain startups can ignite growth. Portugal, for example, exempts individual crypto earnings from taxes, luring hordes of entrepreneurs to Lisbon, now dubbed the ‘Blockchain Riviera’,” Kapoor said.

“We should implement strict guidelines on data privacy, cybersecurity, and anti-money laundering (AML) to protect users. The EU’s MiCA (Markets in Crypto-Assets) regulation is a leading example, requiring crypto asset issuers to disclose whitepapers and adhere to stringent consumer safeguards, and there is no harm in taking a leaf from this progressive framework,” Kapoor added.

Tokenization boost

Earlier in January, Rohan Sharan, founder of India’s Timechain Labs, which has been educating developers and funneling talent into the BSV ecosystem, told CoinGeek he is looking to partner with mutual funds companies for tokenization.

Sharan is working on tokenizing real-world assets (RWAs) instead of focusing on digital currencies, which remains a grey area in India. Although India acknowledged the significance of blockchain, the emerging technology continues to power products behind-the-scenes. Successful applications are the ones that do not even mention blockchain on their website, Sharan said.

In August 2024, the Reserve Bank of India (RBI) said India’s growing adoption of blockchains and distributed ledger technology has bolstered support for tokenized deposits or digital representations of traditional bank deposits hosted on a secure blockchain. RBI said that tokenized deposits can be applied in various areas, such as domestic and cross-border payments, trading and settlement, and cash collateral management. Their programmability enables seamless integration into smart contracts, combining payment data and value for ‘atomic’ settlement.

Real-world asset tokenization is expected to reach $50 billion in 2025, according to a report by Ozean.

“Governments must incentivize tokenization of real-world assets like real estate, art, and infrastructure. A good idea would be for policymakers to introduce tokenized public projects, such as fractional ownership of toll roads or renewable energy farms, to encourage citizens’ participation in blockchain ecosystems,” Kapoor stated. For instance, Kapoor said the United Arab Emirates’ Kiklabb initiative allows businesses to tokenize equity shares when registering in Dubai, creating a model for blending innovation and public-private collaboration.

“One thing is certain: [India’s] 2025 budget will either chart a bold course forward or prolong the suspense for a sector bursting with untapped potential. I am rooting for the former…and I am fairly confident that this year may just be the turning point that will pleasantly surprise the community and usher in an eagerly awaited era of innovation,” Kapoor added.

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