Budget 2026 Crypto Penalties: ₹200/Day Fine Can Hit Startups Hard

Nirmala Sitharaman suggested making it harder for cryptocurrency firms to comply with reporting requirements and creating a system of penalties for noncompliance.

Budget 2026 Crypto Penalties and Reporting Burden

According to the recommendations, companies that deal with cryptocurrencies and virtual assets might be fined INR 200 per day for failing to provide transaction statements and INR 50,000 for providing false information or neglecting to update it.

“To guarantee compliance with section 509 of the Income-tax Act, 2025 and establish a disincentive for non-providing of statements or furnishing false information in respect of crypto assets,” the FM said.

Union Budget 2026 and Crypto Compliance Measures

Nirmala Sitharaman suggested raising the reporting compliance burden for cryptocurrency companies and a corresponding penalty system for non-compliance, even though the Union Budget 2026–2027 did not make cryptocurrencies and virtual digital assets a major area of attention.

The suggestions would penalize cryptocurrency and virtual asset dealers INR 200 per day for failing to provide transaction statements and INR 50,000 for providing incorrect information or neglecting to update it.

Income-tax Act 2025 and Penalty Provisions

“To guarantee compliance with section 509 of the Income-tax Act, 2025 and establish a disincentive for non-providing of statements or furnishing false information in respect of crypto assets,” the FM said.

The Income-tax Act of 2025 does not yet have a criminal provision to guarantee timely and correct reporting by cryptocurrency exchanges and trading platforms. If approved, the new regulations will take effect on April 1, 2026.

Industry Reaction to Crypto Penalty Framework

“For the cryptocurrency business, the adoption of explicit punishment rules is a welcome milestone.” The government has now established strict guidelines for tax reporting and compliance for both VASPs and users. According to Ashish Singhal, cofounder of PeepalCo-operated cryptocurrency platform CoinSwitch, “This reinforces the “Compliance-First” approach of Indian platforms like CoinSwitch, insulating consumers from reporting risks and aligning with compliance aims.”

He went on to say that the platform would keep collaborating with the government to create a user-first, balanced tax system that combines strong control with financial sustainability.

Crypto Exchanges and Tax Compliance Stance

A representative for CoinDCX told Inc42 that the company has consistently promoted maintaining tax compliance. We have even started a number of education-focused programs throughout the years to encourage tax-compliant transactions. This was anticipated as we have always maintained clarity in our position.

In January 2026, the Financial Intelligence Unit (FIU) of India took action to designate cryptocurrency exchanges as reporting businesses under the Prevention of Money Laundering Act (PMLA). The industry as a whole applauded this action, describing it as a significant step toward the recognition and regulation of cryptocurrency trading businesses.

Compliance Costs and Startup Concerns

Along with new compliance procedures for cryptocurrency exchanges, the amended standards include live detection using selfies and geotracking throughout the onboarding process.

While many industry participants applauded the action as a sign of tightening regulations to increase the trust of retail investors, others said that the expenses of adhering to these rules would impede the expansion of cryptocurrency firms.

India’s Crypto Adoption and Global Standing

One of the reasons cryptocurrency exchanges have demanded formal regulation of the asset class is the widespread use of cryptocurrencies in India. As of September 2025, India leads the world in cryptocurrency trading activity according to Chainalysis’s 2025 Global Crypto Adoption Index.

Increased verification, monitoring systems, and reporting requirements will result in increased operating and compliance expenses for exchanges. The CEO and creator of the cryptocurrency exchange Unocoin, Sathvik Vishwanath, told Inc42 in January after the new FIU disclosure regulations that although integrating these laws would need investments in technology, compliance teams, and relationships with KYC providers, it also lowers regulatory risk over time.

Concerns Over Regulatory Clarity

Others, however, believed that many startups and new businesses might be crippled by new KYC standards and compliance in the lack of guidelines or clarity on how to operate the organization. Aishwary Gupta, director of global payments at blockchain unicorn Polygon, said, “Crypto businesses now face substantial compliance expenses, including the need to engage additional full-time staff even when there is no clarification on the regulatory side.”

Despite the lack of an official announcement about the legal status of cryptocurrencies in India, these steps, together with the 2022 introduction of a 30% tax on cryptocurrency profits and a 1% tax deducted at source for all cryptocurrency transactions, are seen as a means of legitimizing cryptocurrency trade in India.

Shadow Regulations and Investor Protection Gaps

Despite the lack of an official announcement designating cryptocurrencies as an asset class, some refer to these restrictions as “shadow regulations.” For example, the investor protection procedures that accompany investments in securities, stocks, AIFs, and other regulated asset classes are now absent from cryptocurrency assets.

According to Singhal of CoinSwitch, the ecosystem requires economic rationalization in order to maintain India’s Web3 and crypto innovation and skill, even as compliance and monitoring have been strengthened. “The 30% flat capital gains rate, the 1% TDS, and the absence of loss offset create an unequal environment for true participation. These actions run the danger of pushing Indian cash to offshore sites that do not comply, leaving consumers open to financial and legal scrutiny.

Does India charge 30% for cryptocurrencies?

Income from the transfer of virtual digital assets is subject to a flat 30% tax in India under the Crypto Tax. Regardless of holding time or income bracket, this rate is applicable. Profits from the sale, exchange, or gift of cryptocurrency assets are subject to the tax.

Does India impose a 70% tax on cryptocurrency?

Tax penalties of up to 70% may be applied by Indian authorities on cryptocurrency revenues that were not previously declared. Any unpaid taxes are subject to interest. Criminal prosecution is an option in extreme circumstances.

What is one cryptocurrency worth in rupees?

Since cryptocurrency is not a single currency, “one crypto” does not have a single set value. The price of each of the several cryptocurrencies varies in Indian rupees (₹).

For instance, one Bitcoin (BTC), the most well-known cryptocurrency, is worth lakhs of rupees. Although Ethereum (ETH) is less expensive than Bitcoin, it still costs thousands of rupees. However, certain cryptocurrencies, such as Shiba Inu or Dogecoin, could be valued less than ₹1.

Any cryptocurrency’s value in rupees is determined by a number of variables, including supply and demand, market news, governmental restrictions, investor interest, and the state of the world economy. Additionally, cryptocurrency values fluctuate every second, so tomorrow’s price can be very different from today’s.

You must choose the particular coin you are referring to on a live cryptocurrency exchange or app in order to get the precise value.

Frequently asked questions

1. When will the new regulations on cryptocurrency penalties take effect?

The proposed penalty rules, if granted, would go into effect on April 1, 2026, providing cryptocurrency businesses with a short window of time to improve their reporting and compliance processes.

2. To whom will the new cryptocurrency reporting penalty apply?

Crypto exchanges, virtual asset service providers (VASPs), and platforms that enable cryptocurrency transactions and must give transaction statements in accordance with the Income-tax Act will be subject to the fines.

3. What kinds of reporting errors are punishable?

Failing to file transaction statements on time, providing false information, or neglecting to rectify wrong facts after discovery may all result in penalties.

4. Can startups escape these penalties?

Yes, By establishing robust internal compliance processes, adhering to FIU and income-tax reporting requirements, and ensuring timely, accurate, and comprehensive reporting, startups may avoid fines.

5. Will increased adherence to regulations boost confidence in cryptocurrency platforms?

By decreasing fraud and increasing transparency, stricter compliance may promote investor trust, but it may also raise operational expenses for firms that are smaller or in their early stages.

Conclusion

Despite the lack of significant tax breaks for the cryptocurrency industry, the Union Budget 2026 makes it quite clear that the government intends to strengthen control and impose responsibility. India is encouraging cryptocurrency companies to adopt a compliance-first environment by proposing daily penalties and set fines for false disclosures.

These actions bring the sector closer to regulatory legitimacy even if they may put pressure on smaller firms owing to increased expenses. Going ahead, maintaining India’s Web3 innovation and talent will require striking a balance between stringent compliance and economic sustainability.

Disclaimer:

This article is for informational purposes only and does not constitute legal, tax, or investment advice. Readers should consult a qualified professional before making any decisions related to cryptocurrency or tax compliance.