India's 2026 Budget Doubles Down on Crypto Rules: 30% Tax Stays, New Penalties Introduced for Reporting Lapses
New Delhi — In a move signaling continued regulatory rigor over digital assets, India's Union Budget for 2026-27 has left the controversial cryptocurrency tax structure intact while rolling out a new framework of financial penalties aimed at tightening reporting compliance. The government's stance dashes industry hopes for a softening of rules that have been criticized for stifling domestic trading activity.
The Finance Bill, 2026, proposes amendments that will impose a daily penalty of approximately $2.20 (₹200) for each day a required crypto-asset transaction statement is not filed. Separately, a substantial flat penalty of about $545 (₹50,000) will apply for submitting incorrect information or failing to rectify errors after notification. These provisions, set to take effect from April 1, 2026, target entities mandated under Section 509 of the Income-tax Act to report crypto transactions.
Officials state the penalty mechanism, detailed in the Bill's explanatory memorandum, is designed to "strengthen compliance and ensure accuracy" in a sector often viewed as opaque. However, the core tax architecture remains untouched: a flat 30% levy on crypto gains, coupled with a 1% Tax Deducted at Source (TDS) on all trades. This dual framework, introduced in 2022, has been a persistent pain point for the industry, which argues it drains liquidity and drives users to less regulated offshore platforms.
"The government is choosing enforcement over encouragement," said market analyst Priya Mehta from FinInsight Consultancy in Mumbai. "By adding penalties without reforming the underlying tax burden, they risk further alienating legitimate operators while the informal market adapts and continues."
The decision follows months of lobbying by domestic exchanges and blockchain associations for a reduction in the TDS rate and for allowing loss offsets against gains. In a statement, Ashish Singhal, co-founder of CoinSwitch, reiterated that the current regime "creates friction rather than fairness" for retail investors and proposed reducing the TDS to 0.01% to improve market liquidity and transparency.
Voices from the Community
Arjun Patel, Tech Entrepreneur (Bangalore): "This is a missed opportunity for innovation. The reporting penalties are understandable for transparency, but maintaining the punitive 30% tax shows a lack of long-term vision for Web3 in India. We're capping our own potential."
Deepika Sharma, Chartered Accountant (Delhi): "The clarity on penalties is actually helpful for compliance. My clients in the crypto space needed clear rules. The 30% tax is high, but it brings certainty. Now the focus must be on seamless reporting infrastructure."
Rohan Malhotra, Retail Investor (Goa): "It's utterly disappointing and frankly tone-deaf! They're just squeezing more blood from a stone. The 1% TDS on every trade kills any small profit. Now with threats of heavy penalties for paperwork errors? This isn't regulation; it's a slow suffocation of the industry."
Professor Anjali Rao, Economics Department, University of Delhi: "The budget reflects a cautious, revenue-secure approach. The penalties aim to formalize data collection, which is crucial for macroeconomic monitoring. However, the unchanged high tax rate suggests policymakers still view crypto primarily through a fiscal lens rather than as a technological ecosystem with growth implications."
As the provisions move toward implementation, the focus shifts to how reporting entities will adapt to the stricter compliance landscape amid an unchanged and challenging tax environment.