India’s 2026-27 federal budget keeps the country’s cryptocurrency tax regime unchanged, retaining existing transaction tax and withholding tax rules, while proposing a new penalty framework aimed at strengthening compliance in crypto asset reporting.
Under amendments proposed in the Finance Bill 2026, entities required to report crypto-asset transactions to tax authorities will face penalties for lapses, including daily penalties for non-declaration and fixed charges for inaccurate disclosures.
This regulation will take effect from April 1, 2026.
The proposal applies to reporting entities under Section 509 of the Income Tax Act, which requires that statements related to transactions in crypto assets be provided.
Those who fail to submit the required declaration face a daily penalty of 200 rupees (approximately $2.20) as long as the default continues. If the information submitted is incorrect or the error is not corrected after being reported, a separate flat fine of 50,000 rupees (approximately US$545) will be imposed.
The changes are detailed in the Memorandum Interpreting the Provisions of the Finance Bill and will be implemented through amendments to Section 446 of the Bill.
The move is intended to enhance compliance and deter inaccurate or incomplete reporting, the memo said.
While the government has stepped up reporting enforcement, it has not changed its broader cryptocurrency tax framework. India continues to impose a flat 30% tax on cryptocurrency trading gains and a 1% tax deducted at source (TDS) on transactions – measures that industry players have long argued would curb liquidity and push trading activity offshore.
The decision to keep taxes and TDS unchanged has disappointed sections of the domestic cryptocurrency industry, who had hoped for relief or a realignment after months of lobbying.
Market participants said that despite the expansion of compliance obligations, existing frictions persist due to a lack of reforms.
“The current tax framework poses 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. “Reducing TDS for VDA transactions from 1% to 0.01% can improve liquidity, simplify compliance and increase transparency while retaining transaction traceability.”
“Raising the TDS threshold to Rs 5 lakh will help protect small investors from disproportionate impact,” he added.
