India Keeps 30% Crypto Tax, Adds ₹50,000 Reporting Penalty
India's Union Budget for 2026-27 tightened the country's crypto compliance framework by introducing new penalties for reporting failures, while leaving its stringent tax rates unchanged. Effective April 1, 2026, entities that fail to furnish required statements on crypto-asset transactions will face a daily fine of ₹200 (approximately $2.20). Furthermore, a flat penalty of ₹50,000 (around $545) will be imposed for submitting incorrect information or failing to rectify errors when notified.
These new measures signal a clear focus on enforcement rather than easing market friction. The government opted to maintain the controversial 30% tax on all crypto gains and the 1% tax deducted at source (TDS) on trades. The decision leaves the existing tax structure, which the industry claims hampers liquidity and drives trading volume offshore, firmly in place.
Industry's Call for Lowering 1% TDS Goes Unheeded
The decision to increase compliance burdens without offering tax relief has drawn criticism from India's domestic crypto industry. Market participants had lobbied for a significant reduction in the TDS rate from 1% to 0.01%, arguing that the current rate extracts too much working capital from the market and creates substantial friction for active traders.
The current tax framework presents challenges for retail participants by taxing transactions without recognising losses, creating friction rather than fairness. A reduction in TDS on VDA transactions from 1% to 0.01% could improve liquidity, ease compliance, and enhance transparency.
— Ashish Singhal, Co-founder of CoinSwitch.
Industry leaders also proposed raising the TDS threshold to ₹5 lakh to protect smaller investors, but these appeals were not addressed in the new budget. The government's actions suggest its priority is strengthening its data collection and tax collection capabilities, even at the cost of market efficiency.
New Rules Align with Global Crackdown on Tax Evasion
India's new penalties are not an isolated policy but part of a larger global trend toward comprehensive crypto tax enforcement. The move is consistent with the principles of the Crypto Asset Reporting Framework (CARF), an initiative by the Organisation for Economic Co-operation and Development (OECD) that went into effect in over 50 countries at the start of 2026. CARF mandates that crypto service providers, including exchanges, collect and report customer transaction data to national tax authorities, who then share this information internationally.
This coordinated effort is designed to eliminate offshore tax havens and give governments unprecedented visibility into digital asset holdings. By implementing stricter domestic reporting rules, India is aligning its regulatory framework with this international standard, ensuring it can track crypto transactions and enforce tax obligations as the era of unreported offshore crypto gains comes to a close.
