India’s Union Budget 2026: What It Means for Crypto Taxation and Compliance

The Union Budget for India in 2026, presented by Finance Minister Nirmala Sitharaman, has maintained the existing tax framework for cryptocurrencies, leaving the 30% tax levy and the 1% TDS (Tax Deducted at Source) unchanged. Notably absent from the speech were any specific references to cryptocurrencies or digital assets, which left many industry stakeholders disappointed. These decisions kept in place the prevailing regulatory structure, despite calls from the crypto industry for enhanced clarity and liquidity relief.

Crypto Taxation: Status Quo Remains

In her budget speech, Sitharaman refrained from addressing cryptocurrencies explicitly, which means that Sections 115BBH and 194S of the Income Tax Act continue to govern the taxation of Virtual Digital Assets (VDAs). Under these sections, profits from crypto transactions are taxed at a hefty 30%, with an additional 1% applied at the source. This setup remains stringent, as it does not allow investors to offset losses against gains or claim deductions, except for the original purchase cost. Consequently, the tax burden is felt even during overall loss years, where traders must still pay taxes on profitable transactions, compounding the financial strain.

Compliance Focus Amidst Industry Engagement

Despite extensive consultations with crypto exchanges and reporting firms advocating for a re-evaluation of the tax structure, the budget’s focus was primarily on tightening compliance measures rather than reform. The message was clear: while the government’s intention to regulate was strong, the resolution of existing tax ambiguities will have to wait. Interestingly, new penalty provisions have emerged under Section 509 of the Income-tax Act of 2025, which will impose fines for failure to accurately file crypto-related tax statements, starting April 1, 2026.

Trading Outcomes and Tax Liabilities: Liquidity Challenges

Recent data from the fiscal year 2024-25 highlighted significant disparities between trading outcomes and tax obligations in the crypto sector. According to KoinX’s 2025 report, while nearly 51% of investors reported net gains, an almost equal number incurred losses throughout the year. Taxable capital gains reached ₹3,722 crore, despite total reported net losses of ₹1,178 crore. This means that investors were still paying taxes on ₹180 crore in gains, showcasing the inequity of the current tax framework. Moreover, total TDS collected from crypto transactions was substantial, totaling ₹511.83 crore, with KoinX users alone contributing ₹130.16 crore.

Penalties and Regulatory Compliance

While the budget did not usher in changes for crypto taxation, it did impose stricter compliance measures. The penalties for inaccurate reporting can be severe; a fine of ₹200 per day applies for delays, while a ₹50,000 fine is set for inaccurate disclosures. This regulatory tightening mirrors broader trends in capital markets, where share buybacks have faced new capital gains tax impositions. Here, corporate promoters are taxed at 22%, and non-corporate promoters face up to 30%. This creates an atmosphere where the enforcement of compliance is emphasized, leaving crypto stakeholders feeling the pressure.

Strengthening KYC Through New Compliance Measures

In a bid to enhance Know Your Customer (KYC) protocols and improve overall oversight of crypto transactions, India’s Financial Intelligence Unit (FIU) has implemented a series of stringent rules. These include requirements for live selfies, geo-tagging, and bank verification through test transactions for crypto exchanges and service providers. This new layer of compliance highlights the government’s emphasis on monitoring and regulation, although it may also deter some potential investors due to increased scrutiny.

Insights from Industry Executives

Following the budget announcement, industry leaders expressed mixed feelings about the continuity of the current policy landscape. Executives like Edul Patel of Mudrex and Nischal Shetty of WazirX noted the stability this brings, while also stressing the importance of compliance. Ashish Singhal of CoinSwitch emphasized that the penalties could help in formalizing reporting standards, even if this doesn’t resolve the underlying issues of the tax structure. While stability in regulatory frameworks is often beneficial for industry growth, the lack of changes to the tax burden is likely to remain a talking point among stakeholders vying for reform.

In conclusion, India’s Union Budget 2026 has preserved the existing crypto tax framework while introducing stricter compliance measures. The decision not to alter taxation rules has led to widespread concerns among investors, who face a challenging trading environment. It remains to be seen how these regulations will evolve in response to continuous industry engagement and public pressure for reform.