No incentives for crypto in Budget 2026: Know when you have to pay tax on trading

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• Budget 2026 imposes strict penalties for inaccurate crypto transaction reports
• No changes made to 1% TDS or 30% capital gains tax on crypto transactions
• Crypto industry seeks tax relief and loss set-off provisions for future budgets

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The Union Budget 2026 may not have delivered incentives for the country’s emerging cryptocurrency sector, but it has sent a clear and constructive signal to India’s crypto ecosystem by strengthening the need for accurate and timely reporting of crypto-asset transactions. The crypto market continues to hope for tax relaxations, deductions on gains, and policy clarity.

The 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. As per the provision under Section 509 of the I-T Act 2025, a penalty applies for failure to furnish the required statement at Rs 200 per day, and Rs 50,000 for providing inaccurate information in a statement of transaction of crypto assets.

The provision under the Income Tax Act, 2025, will come into effect from April 1, 2026.

Crypto players have welcomed the move, saying that such a provision sends a clear and constructive signal for India’s crypto ecosystem by reinforcing the importance of accurate and timely reporting of crypto-asset transactions.

“By introducing well-defined measures to address non-compliance, the Budget strengthens accountability while bringing digital asset reporting closer in line with established financial standards. Importantly, this clarity enables exchanges and market participants to build compliance frameworks with greater confidence and operational certainty,” said Raj Karkara, COO of ZebPay.

Previously, the Financial Intelligence Unit-India (FIU-IND) updated its AML (Anti-money Laundering) and CFT (Countering the Financing of Terrorism) guidelines in January 2026, classifying crypto exchanges and VDA service providers as Reporting Entities under the PMLA Act, 2002 (Prevention of Money Laundering Act).

“Taken together, these measures reflect a cohesive regulatory direction that builds trust, enhances accountability, and supports the long-term, responsible growth of the digital asset industry in India.”

No changes to TDS on crypto transactions

A 1 percent tax deducted at source (TDS) will continue to be levied on every cryptocurrency transaction, which will be collected by the exchanges which investors sign up with. The industry has been demanding that the Centre cut the TDS rate to 0.01 percent on crypto and other virtual digital asset (VDA) transactions.

The 1 percent TDS was introduced on July 1, 2022, following the Budget 2022 announcement. Implemented under Section 194S of the Income Tax Act, the provision requires buyers of virtual digital assets to deduct 1 percent TDS on each transaction, which crypto exchanges then remit to the government.

30 percent flat capital gains tax on VDAs

The Union Budget 2022 also imposed a flat 30 percent tax on gains from virtual digital assets, placing crypto income alongside lottery and gambling winnings under a stricter tax framework.

Under this rule, profits from cryptocurrencies are taxed at 30% regardless of the holding period. Industry experts say this significantly erodes net returns, particularly for long-term investors who, in other asset classes such as mutual funds, would typically benefit from lower long-term capital gains tax rates.

Set-off against crypto gains

Crypto industry participants are also calling for a move away from transaction-based taxation to a net-revenue approach that allows losses to be set off.

They argue that permitting loss set-off would enable investors to offset losses from one crypto asset against gains from other crypto trades, ensuring tax is levied only on net profits. Currently, however, losses from virtual digital assets cannot be adjusted against gains from crypto or any other asset class.