Budget 2026 imposes penalties for non-reporting of crypto assets under Income Tax Act, 2025

• Budget 2026 proposes penalties on exchanges for non-compliance in crypto-asset reporting
• Rs 200/day penalty for late statements, Rs 50,000 for inaccurate information
• New rules under Section 509 take effect from April 1, 2026

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Budget 2026 has proposed strict penalty provisions for crypto exchanges towards non-compliance in reporting crypto-assets under Section 509 of the Income Tax Act, 2025.

Finance Minister Nirmala Sitharaman, while delivering her budget speech, said, “To ensure compliance with the provisions of Section 509 of the Income-tax Act, 2025 and create a deterrence for non-furnishing of statement or for furnishing inaccurate information in respect of crypto assets in such statement, it is proposed to introduce a penalty provision.”

The proposed Act introduces a penalty of Rs 200 per day for failure to furnish the required statement and Rs 50,000 for providing inaccurate information in a statement of transaction of crypto assets.

The provisions under Section 509 of the Income Tax Act, 2025, will come into force from April 1, 2026. Here’s what it says —

• Sub-section (1) of the proposed section seeks to provide that if any person who is required to furnish a statement in respect of transaction of crypto-asset under section 509(1), fails to furnish such statement within the time as provided by rules under the said section, the income-tax authority as may be provided by rules under that section may impose on him, a penalty of Rs 200 for every day during which such failure continues.

•  Sub-section (2) of the proposed new section seeks to provide that the said income-tax authority may impose a penalty of Rs 50000 on a person required to furnish a statement under sub-section (1) of the section 509, if such person provides inaccurate information in the statement and fails to remove such inaccuracy as per section 509(4) or fails to comply with due diligence the requirement under section 509(5).

The move comes at a time when CBDT has identified undisclosed income from virtual digital assets (VDAs), which include cryptocurrency and other non-fungible tokens, worth Rs 888.82 crore.

"The introduction of specific penalty provisions is a positive milestone for the crypto industry. The government has formalized high standards of tax compliance and reporting for both users and VASPs. This validates the ‘Compliance-First’ model of Indian crypto platforms, shielding users from reporting risks and aligning with compliance goals,” said Ashish Singhal, Co-founder, CoinSwitch.

The penalty also comes at a time when the crypto industry of India has been demanding TDS cut, tax relief and policy clarity for crypto assets.