India’s Union Budget 2026 has introduced a new penalty framework to enforce crypto-asset transaction reporting.
In simple words, the new budget tightens oversight on exchanges and intermediaries even as the country’s controversial crypto tax regime remains unchanged.
The Finance Bill proposed penalties to enforce reporting obligations under Section 509 of the Income-tax Act, 2025.
Those obligations include requiring “prescribed reporting entities” to submit statements detailing crypto-asset transactions to the tax department. The changes will take effect from the 1st of April, 2026.
What the new penalty framework looks like
Under the new framework, entities that fail to furnish the required statement will face a penalty of Rs. 200 per day until the filing is completed.
A separate flat penalty of Rs. 50,000 will apply if inaccurate or misleading information is reported, or if errors are not corrected after being flagged.
It is clear that the intent is to move from a disclosure requirement with weak consequences to one backed by enforceable penalties.
Raj Karkara, COO of ZebPay, had this to say about the Union Budget of India,
“By introducing well-defined measures to address non-compliance, the Budget strengthens accountability while bringing digital asset reporting closer in line with established financial standards.”
The penalties apply to reporting entities such as crypto exchanges, marketplaces, and intermediaries, rather than directly to individual users. However, the changes are expected to have indirect effects on traders, as platforms tighten data collection, transaction tagging, and reconciliation processes to avoid penalties and regulatory scrutiny.
At the same time, the Budget left crypto taxation unchanged, retaining the 30% tax on virtual digital asset (VDAs) gains, the 1% tax deducted at source on transactions, and restrictions on setting off losses.
On this particular sentiment, Nischal Shetty, Founder, WazirX, commented,
“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.”
Why is enforcement tightening now
The compliance push came against the backdrop of significant offshore migration by Indian crypto traders.
A recent report by crypto tax platform KoinX found that nearly 72.7% of India’s crypto trading volume in FY25 – worth about Rs. 51,252 crore – shifted to offshore exchanges.
With regards to this, TDS accounted for just 0.60% of overall turnover on Indian exchanges – basically showing how transaction-level frictions have reshaped trading behavior.
This trend has also been flagged by AMBCrypto, which estimated that Indian users generated close to $5 trillion in crypto trading volume on offshore exchanges between late 2024 and 2025.
Scrutiny on disclosures is already rising
Tax authorities have also stepped up scrutiny of undisclosed crypto income.
In December, the Central Board of Direct Taxes (CBDT) said it had identified undisclosed VDAs worth Rs. 888.82 crore and sent more than 44,000 communications to taxpayers flagged for potential non-disclosure.
Final Thoughts
- India’s budget introduced a formal penalty framework to enforce crypto-asset transaction reporting.
- Failure to file reports attracts a Rs. 200-per-day penalty, while inaccurate or misleading reporting can trigger a flat Rs. 50,000 fine.
