Bitcoin traders to face a $545 penalty for lapse

India’s Union Budget for 2026-27 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 around crypto-asset reporting.

Under amendments proposed in the Finance Bill, 2026, entities required to report crypto-asset transactions to tax authorities would face monetary penalties for lapses, including daily fines for non-filing and a fixed charge for inaccurate disclosures.

The provisions are set to take effect from April 1, 2026.

The proposal applies to reporting entities covered under Section 509 of the Income-tax Act, which mandates the furnishing of statements related to crypto-asset transactions.

Failure to submit the required statement would attract a penalty of ₹200 per day — roughly $2.20 — for as long as the default continues. A separate flat penalty of ₹50,000, or about $545, would apply in cases where incorrect information is filed or errors are not rectified after being flagged.

The changes are detailed in the Memorandum Explaining the Provisions in the Finance Bill and would be implemented through amendments to Section 446 of the Act.

The memorandum says the move is intended to strengthen compliance and discourage inaccurate or incomplete reporting.

While the government has sharpened enforcement on reporting, it stopped short of altering the broader crypto tax framework. India continues to levy a flat 30% tax on gains from crypto transactions, along with a 1% tax deducted at source (TDS) on trades — measures that industry participants have long argued dampen liquidity and push trading activity offshore.

The decision to keep taxes and TDS unchanged disappointed parts 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 recognising 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, ease compliance, and enhance transparency while preserving transaction traceability.”

“Raising the TDS threshold to ₹5 lakh would help protect small investors from disproportionate impact,” he added.