India’s 2026-27 Union Budget has left the country’s crypto tax regime unchanged, retaining the existing transaction tax and withholding rules, while proposing a new penalty framework aimed at tightening compliance with crypto asset reporting.
Under changes proposed in the Finance Bill, 2026, entities required to report crypto-asset transactions to the tax authorities will face monetary penalties for non-filing, including daily fines for non-filing and a flat fee for inaccurate information.
The provisions enter into force on 1 April 2026.
The proposal applies to reporting entities covered by Section 509 of the Income Tax Act, which mandates the filing of declarations regarding transactions involving cryptoassets.
Failure to submit the required declaration will attract a penalty of INR 200 per day – about $2.20 – as long as the default continues. A separate flat penalty of INR 50,000, or about US$545, will apply in cases where incorrect information is submitted or errors are not corrected after being flagged.
The changes are detailed in the memorandum explaining the provisions of the Finance Act and will be implemented through amendments to section 446 of the Act.
The memorandum says the move aims to strengthen compliance and discourage inaccurate or incomplete reporting.
While the government has tightened reporting enforcement, it stopped short of changing the broader crypto tax framework. India continues to levy a flat tax of 30% on gains from crypto transactions, along with a 1% tax deducted at source (TDS) on trades — measures that industry participants have long argued are throttling liquidity and pushing trading activity offshore.
The decision to keep taxes and TDS unchanged disappointed sections of the domestic crypto industry, which had hoped for relief or recalibration after months of lobbying.
Market participants say the lack of reform leaves existing frictions in place even as compliance obligations expand.
“The current tax framework presents challenges for retail participants by taxing transactions without recognizing losses, creating friction rather than fairness,” Ashish Singhal, co-founder of local exchange CoinSwitch, said in an email. “A reduction in TDS on VDA transactions from 1% to 0.01% can improve liquidity, ease compliance and increase transparency while maintaining transaction traceability.”
“Raising the TDS threshold to 5 lakh will help protect small investors from disproportionate impact,” he added.
