India’s Union Budget for 2026-27 left the country’s crypto tax regime unchanged, retaining existing transaction tax and withholding tax rules, while proposing a new penalty framework aimed at strengthening compliance in reporting crypto assets.
Under proposed amendments in the 2026 Finance Bill, entities required to report crypto-asset transactions to tax authorities would be subject to monetary penalties for failure to comply, including daily fines for failure to report and fixed fees for inaccurate disclosures.
The provisions are expected to come into force on April 1, 2026.
The proposal applies to reporting entities covered by Section 509 of the Income Tax Act, which requires reporting related to crypto-asset transactions.
Failure to submit the required declaration would result in a penalty of ₹200 per day, or approximately $2.20, as long as the default persists. A separate fixed penalty of ₹50,000, or about $545, would apply in cases where incorrect information is filed or if errors are not rectified after being reported.
The changes are detailed in the memorandum explaining the provisions of the Finance Bill and would be implemented through amendments to section 446 of the law.
The memorandum states that the move is intended to strengthen compliance and discourage inaccurate or incomplete reporting.
Although the government has strengthened enforcement of reporting rules, it has not changed the broader cryptocurrency tax framework. India continues to levy a flat 30% tax on gains from crypto transactions, as well as a 1% withholding tax (TDS) on transactions – measures that industry players have long said have dampened liquidity and pushed business activities overseas.
The decision to keep taxes and TDS unchanged disappointed a section of the domestic crypto industry, which was hoping for relief or recalibration after months of lobbying.
Market participants say the lack of reform allows existing frictions to remain, even as compliance obligations expand.
“The current tax framework presents challenges for retailers 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% could improve liquidity, facilitate compliance and improve transparency while preserving traceability of transactions.
“Increasing the TDS threshold to ₹5 lakh would help protect small investors from disproportionate impact,” he added.
