Budget 2026 introduces penalties for crypto reporting lapses

Finance Minister Nirmala Sitharaman announced new penalty provisions for entities failing to report crypto asset transactions accurately, as the government tightens oversight of the digital asset sector following recent regulatory measures.

Under amendments to the Income Tax Act proposed in Sunday’s budget, prescribed reporting entities will face a penalty of Rs 200 per day for failing to furnish required statements on crypto asset transactions. Those providing inaccurate information or failing to correct inaccuracies will be liable for a Rs 50,000 penalty.

The penalties, which will take effect from April 1, 2026, mandates reporting entities to furnish information on crypto asset transactions.

Crypto exchanges welcomed the move as a step toward clearer, compliance-driven regulation, saying it formalises reporting standards and reduces user risk.

“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. We remain fully committed to working with policymakers to support the development of a safe, innovative, and globally competitive VDA ecosystem, as the regulatory landscape continues to evolve,” Sumit Gupta Co-founder of Coindcx said in a statemet.

“The introduction of specific penalty provisions is a positive milestone for the crypto industry. By mandating a Rs 200 daily penalty for reporting delays and a Rs 50,000 fine for inaccuracies, the Government has formalized high standards of tax compliance and reporting for both users and VASPs,” Ashish Singhal, Co-founder of CoinSwitch said in a statement.

However, industry insiders also cautioned that without easing harsh tax rules like 1% TDS and the 30% flat tax, growth and innovation could be pushed offshore despite tighter oversight.

“While compliance and surveillance have tightened, true growth requires economic rationalisation to keep Web3 innovation and talent within India. The 1% TDS, lack of offset of losses and the 30% flat capital gains rate, create an asymmetric environment for genuine participation. These measures risk driving Indian capital toward non-compliant offshore platforms, leaving users vulnerable to legal and financial scrutiny,” Singhal’s statement added.

The move comes weeks after the Financial Intelligence Unit issued stringent new guidelines on January 8 requiring crypto exchanges to implement “liveness detection” and geographical tracking for new users to combat money laundering in the digital asset sector.

The FIU guidelines mandate that platformg acs capture live selfies of users to verify physical presence, using software that detects eye blinking or head movements to prevent the use of static photos or deepfakes. Exchanges must also record exact latitude and longitude, timestamps, and IP addresses during account creation, along with employing the penny-drop method to verify bank account details.