Budget 2026: Govt retains 30% crypto tax, adds ₹50,000 penalty for reporting lapses

The Union Budget 2026 left India’s cryptocurrency tax framework largely untouched, retaining the flat 30% tax on gains and the 1% tax deducted at source (TDS) on transactions, even as the government moved to tighten compliance through fresh penalty provisions.

Finance Minister Nirmala Sitharaman, while presenting her ninth consecutive Budget in Parliament on February 1, proposed penalties for non-furnishing or inaccurate reporting of crypto-asset transactions. Under the proposal, a penalty of ₹200 per day will be levied for delays in filing statements, while a flat ₹50,000 fine will apply in cases of inaccurate reporting or failure to correct errors. The provisions will come into effect from April 1, 2026.

“To ensure compliance with the provisions of Section 509 of the Income-tax Act, 2025, and to create a deterrent against non-furnishing of statements or furnishing inaccurate information in respect of crypto assets in such statements, it is proposed to introduce penalty provisions. A penalty of ₹200 per day for non-furnishing of statements and ₹50,000 for furnishing inaccurate particulars and failure to correct such inaccuracies is proposed to be levied,” Sitharaman said.

While enforcement has been sharpened, the government stopped short of recalibrating the broader tax structure for virtual digital assets (VDAs). India continues to impose a 30% tax on crypto gains, disallows loss set-offs and most deductions, and levies a 1% TDS on trades—measures introduced in Budget 2022 and carried forward in subsequent budgets.

Budget disappoints crypto industry

The decision disappointed the domestic crypto industry, which had hoped for relief amid sustained concerns over liquidity and competitiveness. Industry participants argue that the high tax burden and transaction-level TDS have pushed trading activity offshore.

Industry leaders acknowledged the government’s focus on compliance but reiterated calls for economic rationalisation. Nischal Shetty, founder of WazirX, said the continuation of the current regime “remains a key friction point for users and the ecosystem,” impacting liquidity and India’s competitiveness in the global digital asset space.

“These measures continue to impact liquidity, participation and India’s competitiveness in the global digital asset landscape. We remain hopeful that future policy discussions will address these concerns in a manner that balances innovation, compliance, growth and ease of doing business,” Shetty added.

Ashish Singhal, co-founder of CoinSwitch, described the introduction of penalty provisions as a “positive milestone” that formalises compliance standards, but warned that the existing tax structure risks driving Indian capital and talent towards offshore platforms.

“The government has formalised high standards of tax compliance and reporting for both users and VASPs. This validates the ‘compliance-first’ model of Indian platforms like CoinSwitch, shielding users from reporting risks and aligning with compliance goals,” he said.

While compliance and surveillance have tightened, true growth requires economic rationalisation to keep Web3 innovation and talent within India. The 1% TDS, lack of loss offset, and the flat 30% capital gains rate create an asymmetric environment for genuine participation, Singhal added.

Vikram Subburaj, CEO of Giottus, pointed to the Budget’s broader push towards emerging technologies, including allocations for the IndiaAI Mission and deep-tech innovation. “Blockchain can reasonably be viewed as part of the deep-tech stack,” he said, adding that long-term enablement and infrastructure would matter more than near-term market impact.

“For the crypto sector, the takeaway is not immediate price impact but long-term enablement with stronger domestic R&D, deeper talent pipelines, and improved infrastructure for building regulated, India-first use cases,” he said.

Raj Karkara, COO of ZebPay, said policy stability provides a foundation as the ecosystem matures, but stressed the importance of India aligning with global policy shifts as digital assets and tokenisation gain momentum worldwide.

“The Union Budget 2026 retains the current tax framework applicable to virtual digital assets, providing stability for the ecosystem as it matures. Globally, digital assets and Web3 are gaining strong policy and institutional momentum, with several markets in the West taking concrete steps to integrate crypto into their broader financial frameworks,” Karkara said.

72.7% of Indian crypto volume shifted to offshore exchanges

Data released ahead of the Budget by crypto tax platform KoinX underscores these concerns. Its report, India’s Crypto Tax Story 2025, based on anonymised data from around 6.7 lakh users for FY25, showed that nearly 72.7% of Indian crypto trading volume had shifted to offshore exchanges. Despite users collectively reporting ₹6,394 crore in profits and ₹4,781 crore in losses, almost half paid around ₹180 crore in capital gains tax even while incurring net losses, due to the prohibition on loss set-offs.

The report also noted that the 1% TDS accounted for just 0.6% of total turnover on domestic exchanges, suggesting its role has been largely limited to transaction-level reporting rather than revenue generation.

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