India keeps 30% crypto tax adds penalties

TLDR

India has kept its 30% tax on crypto gains and 1% TDS in the 2026 budget while adding new penalties for poor reporting of crypto transactions.

1. The existing 30% tax on crypto income and 1% TDS per trade remain unchanged despite heavy industry lobbying.
2. From 1 April 2026, exchanges and other reporting entities face new fines for delayed, missing, or inaccurate crypto transaction reports.
3. The mix of high taxes and stricter reporting is likely to keep pushing Indian trading offshore unless future reforms ease TDS and allow loss set offs.

Deep Dive

1. What Stayed The Same

Indias Union Budget 2026 keeps the current regime of a flat 30% tax on gains from virtual digital assets and a 1% Tax Deducted at Source (TDS) on each taxable crypto transaction unchanged, as summarized in multiple budget analyses and reports on the 30% tax and 1% TDS.

Losses from one crypto asset still cannot be offset against gains from another, and you generally cannot carry forward crypto losses, which means traders can owe tax even in a net loss year.

Industry groups had pushed for lower TDS and permission to offset losses, but the budget did not address these points, focusing instead on enforcement.

2. What Actually Changed

Rather than altering rates, the Finance Bill 2026 introduces a penalty framework for entities that must report crypto transactions to the tax department under Section 509 of the Income Tax Act.

From 1 April 2026, failure to file required statements on time triggers a penalty of ?200 per day, and filing incorrect or uncorrected information triggers a flat ?50,000 penalty, according to the new penalty framework.

These penalties are aimed at exchanges, marketplaces, and other intermediaries, but in practice they encourage tighter KYC, data collection, and transaction tagging for users as platforms try to avoid fines.

3. Impact And What To Watch

High taxes and TDS had already pushed about 73% of Indias crypto trading volume, roughly $6.1 billion, to offshore platforms, as shown in analysis of offshore trading migration.

The unchanged 30% tax plus 1% TDS keeps domestic trading expensive, while the new penalties increase compliance burden for local platforms, which may further reduce onshore liquidity and deepen the shift to foreign exchanges and P2P routes.

Watch for three potential turning points: any cut in TDS rate, permission to offset crypto losses against gains, or a broader regulatory framework following ongoing G20 work on crypto rules.

Conclusion

India has chosen to harden enforcement around crypto reporting while leaving one of the worlds harshest tax regimes intact. That combination protects the states audit trail and revenue, but it keeps domestic trading at a disadvantage, encouraging offshore activity until policymakers eventually revisit TDS and loss treatment as part of a fuller regulatory framework.