Budget 2026: New penalties imposed on crypto sector for non-disclosure, misreporting of assets

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Crypto reporting entities such as exchanges and investment platforms will now have to pay a fine of Rs 200 per day for non-furnishing of crypto transaction details and Rs 50,000 for sharing inaccurate information, Finance Minister Nirmala Sitharaman said during her Budget speech on February 1.

These penalties under the Income Tax Act, 2025 will be effective from April 1, 2026.

“To ensure compliance to 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 penalty provision,” She said.

Sitharaman added, “Penalty of Rs. 200 per day for non-furnishing of statement and Rs. 50,000 for furnishing inaccurate particulars and failure to correct such inaccuracy is proposed to be levied.”

Other penalties levied

Additionally, section 508 (2) of the Income Tax Act clarified that the charge fined for continued non-disclosure of crypto income statement will not exceed beyond Rs 100,000.

Further, as per section 263, a sum of Rs 1,000 will be charged if the total income of such person doesn’t exceed Rs 500,000 and Rs 5,000 for any other cases.

If the person fails to furnish the report of crypto statement audit with deadline, he will be liable to pay up Rs 75,000 for a delay of up to one month and Rs 150,000 thereafter.

Interestingly, in last year's Union Budget, the Finance Ministry had introduced a section that gave power to government agencies to conduct block assessment or investigation of undisclosed crypto income of 'individual' traders, which if found not reported will amount to as high as 60 percent income tax fine for the entire period of the unreported crypto income, as was mentioned under 158BA(7) referring to ‘Tax in the case of block assessment of search cases.’

Punit Agarwal, founder and CEO of KoinX, a crypto tax compliance platform explained that while last year’s change brought crypto under the existing undisclosed income framework, which applies to taxpayers who fail to disclose income, this year’s proposal is different.

"It targets platform-level reporting compliance, penalising exchanges and intermediaries for non-filing or inaccurate transaction data. The intent is to improve systemic transparency and data quality, not to penalise individual investors," he told Moneycontrol.

What did the crypto industry say?

According to Edul Patel, CEO, Mudrex, the proposed penalties for non-disclosure and misreporting of crypto assets reflect a “broader policy shift towards strengthening compliance and transparency in India’s digital asset ecosystem”

“This builds on the recently updated FIU-IND guidelines for exchanges. By creating clearer accountability, these measures bring crypto transactions closer to mainstream financial reporting standards,” he said.

"The Union Budget 2026 proposes strengthening compliance for crypto platforms over lapses in transaction disclosures, aiming to curb tax evasion in virtual digital assets. This requires exchanges to bolster compliance and accurate reporting of user transactions,” said Sumit Gupta, Co-founder CoinDCX.

He added that the exchange will work closely with policymakers to support the development of an innovative, and globally competitive VDA (virtual digital asset) ecosystem, as the regulatory landscape continues to evolve.

In the long term, these industry players believe that growth will come not only from innovation but trust and regulatory clarity that such measures bring.

FIU-Ind’s updated guidelines

In January, the Finance Ministry’s Financial Intelligence Unit of India (FIU-IND)  issued updated guidelines to tighten business operation practices, cybersecurity disclosures and KYC norms for VDA companies registering in India.

As per the updated guidelines, crypto platforms now have to do more than just allow simple document uploads. Users must take a “live selfie” using software that verifies their presence, typically through eye-blinking or head movement to prevent the use of static photos or deepfakes.

Exchanges must record the exact latitude and longitude, date, timestamp, and IP address from which a user starts creating an account.