Key Takeaways:

• India’s Budget 2026 introduces daily and flat penalties for crypto platforms that fail to report crypto transactions accurately.
• The existing 30% crypto tax and 1% Tax Deducted at Source (TDS) regime remains unchanged for investors.
• Stronger reporting rules prepare India for global crypto data sharing under the OECD’s CARF framework.

In a move to strengthen the oversight of digital assets, India has introduced new penalties for cryptocurrency platforms that fail to accurately report transaction data. Finance Minister Nirmala Sitharaman’s Union Budget 2026, presented on 1 February, 2026, maintained existing crypto tax rates but established clear fines for exchanges that misreporting deadlines or submit incorrect information to tax authorities. The new rules take effect from 1 April, 2026.

Section 446 of the Indian Income-tax Act, 2025, will be amended to introduce penalty provisions related to crypto transaction reporting obligations under Section 509.

Reporting entities face a dual penalty structure

The budget establishes two types of penalties targeting crypto exchanges and service providers. Platforms that fail to submit required transaction statements will face Rs. 200 (about $2.20) per day for non-compliance. A flat penalty of Rs. 50,000 (about $550) applies to platforms that furnish inaccurate information and fail to correct such inaccuracies.

Before this budget, exchanges were required to submit crypto transaction statements but faced no specific penalties for delayed or inaccurate reporting. The new framework fills this enforcement gap by establishing defined consequences.

Individual investors are not directly affected by these penalties. The reporting responsibility falls on platforms and intermediaries that must submit transaction-level data to the Income-tax Department within prescribed timelines.

Section 509 already requires prescribed reporting entities to furnish information about crypto transactions. The amendment to Section 446 creates a deterrent for non-compliance, bringing crypto reporting standards closer to those applied to other financial intermediaries.

The current crypto tax regime continues without changes

Budget 2026 left the virtual digital asset (VDA) tax framework unchanged. The 30% flat tax on gains, introduced in Budget 2022, remains in place along with the 1% tax deducted at source (TDS, adjustable while filing tax returns at the end of the financial year) on every transaction. Additionally, investors cannot offset crypto losses against other income.

The 1% TDS applies to transaction value rather than profit. For example, two trading transactions valued at Rs. 1 lakh each (about $1,100) will lock in Rs. 2,000 (about $22) in TDS, regardless of the trades’ outcomes. As a result, frequent trading leads to substantial TDS accumulation even when these do not generate net gains, affecting available capital for trading. 

The steep 30% flat tax obligation arises from transfers that create economic gain. This includes converting crypto to rupees, swapping one cryptocurrency for another, and using crypto to buy goods or services. Simple wallet-to-wallet transfers where ownership does not change typically do not trigger tax liability.

Aligning with global crypto tax transparency standards

Budget 2026’s focus on accurate domestic reporting positions India for smooth integration with the OECD’s Crypto-Asset Reporting Framework (CARF). India has committed to CARF, which mandates the automatic exchange of crypto transaction data between countries from 2027.

The OECD (Organisation for Economic Co-operation and Development), an international intergovernmental organization that promotes global trade and economic progress, finalized CARF in October 2022 under G20 mandates to combat tax evasion through cross-border information sharing. 

G20 or Group of Twenty is a premier international forum made up of countries that represent around 85% of global gross domestic product (GDP).

CARF works similarly to existing banking information exchange systems but specifically targets digital assets. Currently, 67 jurisdictions have committed to implementing CARF, with India among 52 nations set to begin exchanges in 2027. 

By building a robust domestic reporting infrastructure through Budget 2026’s measures, India establishes the foundation to share data with partners, including the United States and European Union countries. This cross-border oversight capability enhances India’s ability to identify and recover untaxed offshore crypto holdings by Indian residents.