As cryptocurrency adoption grows in India, tax compliance around digital assets has become stricter than ever.
The Union Budget 2026 reinforces the government’s intent to closely monitor crypto transactions, making accurate reporting and timely tax disclosure mandatory for traders, investors, and exchanges alike.
India’s Crypto Tax Landscape After Union Budget 2026
The Union Budget 2026 has strengthened the need for accurate and timely reporting of crypto-asset transactions, which has given a clear and positive signal to India’s crypto ecosystem, even if it may not have provided much for the nation’s developing cryptocurrency industry.
The cryptocurrency market is still hoping for regulatory certainty, tax breaks, and profits deductions. Rather, the Budget 2026 suggested severe penalties for cryptocurrency exchanges that fail to register cryptocurrency holdings in accordance with Section 509 of the Income Tax Act of 2025.
Stricter Reporting & Penalties for Crypto Exchanges
According to the aforementioned Section 509 of the I-T Act 2025, there is a penalty of Rs 200 per day for not delivering the appropriate statement and Rs 50,000 for giving false information in a statement of transaction of cryptocurrency assets.
Crypto players have applauded the decision, claiming that by highlighting the need of accurate and prompt reporting of crypto-asset transactions, such a clause sends a clear and positive signal for India’s crypto sector.
🔍 Crypto Transaction Reporting Highlights
- Law: Section 509, Income Tax Act 2025
- Penalty: ₹200 per day for non-reporting
- False Reporting Fine: ₹50,000 per statement
- Coverage: Crypto exchanges & VDA service providers
- Objective: Transparency and tax compliance
Industry Response to Enhanced Accountability
The Budget improves accountability and brings digital asset reporting closer to accepted financial norms by implementing clear procedures to deal with non-compliance. Crucially, this clarification gives exchanges and market players more operational certainty and confidence when developing compliance frameworks, according to Raj Karkara, COO of ZebPay.
In January 2026, the Financial Intelligence Unit-India (FIU-IND) revised its AML (Anit-money Laundering) and CFT (Countering the Finance of Terrorism) guidelines, designating VDA service providers and cryptocurrency exchanges as Reporting Entities under the PMLA Act, 2002 (Prevention of Money Laundering Act).
Unified Regulatory Approach for Digital Assets
“When taken as a whole, these actions show a unified regulatory approach that strengthens responsibility, fosters trust, and promotes the long-term, responsible expansion of the digital asset business in India.”
Every cryptocurrency transaction is now subject to a 1% tax deducted at source (TDS), which ties up traders’ funds. For transactions involving cryptocurrency and other virtual digital assets, the industry has suggested lowering the TDS rate to 0.01 percent.
💰 Cryptocurrency Tax Structure Snapshot
- TDS Rate: 1% per transaction
- Applicable Law: Section 194S, Income Tax Act
- Flat Tax: 30% on crypto gains
- Industry Demand: Reduce TDS to 0.01%
- Impact: Reduced liquidity for traders
Evolution of Crypto Taxation Since Budget 2022
After the publication of the Budget 2022, the 1 percent TDS was implemented on July 1, 2022. The Income Tax Act’s Section 194S mandates that purchasers of virtual digital assets subtract one percent TDS from each transaction, which cryptocurrency exchanges then provide to the government.
Additionally, earnings from virtual digital assets were subject to a flat 30% tax under the Union Budget 2022, bringing cryptocurrency revenue under a more stringent tax framework alongside lottery and gambling wins.
Impact on Long-Term & Active Crypto Investors
Regardless of how long they are held, cryptocurrency gains are subject to a 30% tax. According to industry analysts, this drastically reduces net returns, especially for long-term investors who would normally profit from lower long-term capital gains tax rates in other asset classes like mutual funds.
Participants in the cryptocurrency sector are also advocating for a switch from transaction-based taxes to a net-revenue strategy that permits the deduction of losses.
They contend that allowing loss set-off will guarantee that taxes are only applied to net profits by allowing investors to balance losses from one cryptocurrency asset against gains from other cryptocurrency assets. However, at the moment, gains from cryptocurrency or any other asset class cannot be used to offset losses from virtual digital assets.
Does trading cryptocurrency require us to pay taxes?
Indeed. Cryptocurrency is subject to virtual digital asset (VDA) taxation in India. You pay a flat 30% tax on any profits you generate from trading, selling, exchanging, or spending cryptocurrency, plus an additional 4% for health and education. This is true whether you trade often or seldom.
It is not possible to deduct cryptocurrency losses from other sources of income, like as wages or company revenue. Additionally, exchanges and purchasers often take 1% TDS on cryptocurrency transactions. Even if you make cryptocurrency as a side job, you still have to declare it.
How can I find out whether I have to disclose cryptocurrency on my taxes?
If you sold, traded, exchanged, or utilized cryptocurrency to purchase anything during the fiscal year, you have to record it. A single transaction might result in a tax liability.
Selling or exchanging cryptocurrency makes it taxable, but holding it does not. Gifts, airdrops, staking, and mining income are all subject to reporting. In summary, regardless of the amount, all income or profit generated by cryptocurrency activity must be disclosed in your ITR.
How can I avoid the 30% cryptocurrency tax?
The 30% tax on cryptocurrency revenues in India is legally unavoidable. The legislation prohibits loss set-off and deductions (such as trading fees). Selling your cryptocurrency is the only method to legally lower your taxes (holding only).
There is no tax if you do not sell. Some individuals mistake foreign exchanges or loopholes for tax evasion, which is dangerous and unlawful. While tax evasion is prohibited, tax planning is permitted. 30% tax is required after you book profit.
What happens if I fail to report my cryptocurrency?
Penalties, interest, and scrutiny notifications from the revenue Tax Department may result from failing to submit cryptocurrency revenue. The government already possesses transaction data connected to your PAN since exchanges charge 1% TDS. You risk having your income discovered later if you conceal it.
In addition to interest, penalties may total up to 200% of the tax payable. Prosecution is also an option in extreme circumstances. Ignoring cryptocurrency taxes may seem simple at the moment, but it might cause serious issues down the road during audits or PAN-linked inspections.
When I sell coins, do I have to pay taxes?
Indeed. The sale of cryptocurrency is taxed. The profit is subject to 30% tax if you sell for more than you originally paid. Other costs (such as fees, internet, and power) are not deductible, but the purchase price is.
It is not possible to carry over or modify a loss if you sell at a loss. Even the conversion of one cryptocurrency to another (such as BTC to ETH) is considered a sale and is subject to taxation.
Must I declare cryptocurrency worth less than $600?
Yes, there is not a “$600” minimum exemption limit in India. That is a US-specific regulation, not an Indian one. Your cryptocurrency earnings is legally taxed and reportable, even if it is just ₹100. All taxable income, regardless of quantity, must be reported in accordance with income tax legislation.
Because of TDS and exchange reporting, little transactions are still apparent. Therefore, even for low-value cryptocurrency transactions, reporting is required, so do not believe minor earnings are safe to overlook.
Frequently asked questions
1) What cryptocurrency-related activities are subject to Indian taxes?
Any action that generates cryptocurrency revenue is subject to taxation. This covers selling cryptocurrency for Indian rupees, trading cryptocurrency for another cryptocurrency, purchasing goods or services with cryptocurrency, getting incentives for mining or staking, airdrops, and receiving cryptocurrency as presents (beyond the exemption limit). It is not taxed to own cryptocurrency without making any transactions.
2) How is cryptocurrency profit determined for tax purposes?
Subtracting the buying price from the selling price yields the tax. You may only deduct the cost of purchase. Current tax legislation prohibits deducting expenses like exchange fees, gas fees, electricity, or internet expenditures.
3) Is it taxed to change one cryptocurrency into another?
Yes, transfers between cryptocurrencies are seen as sales of the original asset. The transaction is taxed at 30% depending on the market value of the cryptocurrency received on the exchange date, even if no cash is received.
4) Are there any tax advantages for long-term cryptocurrency investors?
No, India does not differentiate between long-term and short-term cryptocurrency ownership. Any profit is subject to the same flat 30% tax rate regardless of how long you keep cryptocurrency—there is no indexation or concessional rates.
5) What impact does exchange reporting have on certain taxpayers?
Tax authorities must now get transaction data from cryptocurrency exchanges. As a result, there is less opportunity for underreporting since investment activity is becoming more visible. To prevent notifications or fines, taxpayers should make sure their ITR matches exchange data.
Conclusion
India places more emphasis on compliance and openness than incentives when it comes to cryptocurrency taxes. The regulatory path is clear: cryptocurrency revenue must be appropriately recorded and taxed like any other financial gain, even while high tax rates and stringent regulations continue to provide difficulties for traders and investors.
Investors are better off concentrating on disciplined trading, appropriate paperwork, and timely tax filing rather than running the risk of future legal issues due to exchanges’ improved reporting and more severe fines for non-compliance. For Indian cryptocurrency players, knowledge and compliance continue to be the safest course of action until changes are implemented.
Disclaimer:
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Readers are advised to consult a qualified tax professional for guidance specific to their situation.
