The budget reduced the maximum imprisonment for TDS defaults from seven years to two years, with courts allowed to convert sentences into monetary penalties.
India’s crypto investors will get no respite from one of the world’s harshest digital asset tax regimes, as Finance Minister Nirmala Sitharaman on Sunday left the punitive 30% tax rate and 1% Tax Deducted at Source (TDS) unchanged in her ninth consecutive Union Budget presentation.
The decision to maintain the status quo on crypto taxation, first introduced in February 2022, dashes industry hopes for relief from a framework that has driven nearly three-quarters of India’s $6.1 billion (₹51,252 crore) in crypto trading volume to offshore platforms.
The 2022 regime imposed a flat 30% tax on virtual digital asset income with zero deductions except acquisition costs, alongside a 1% TDS that has since crippled high-frequency trading on domestic exchanges.
The unchanged policy means investors continue facing restrictions that prohibit offsetting losses from price drops or security breaches against other income, while the 1% TDS on every transaction makes thin-margin trading strategies commercially unviable on Indian platforms.
The Indian government’s stance “signals that they are still choosing to wait and watch before they decide on next steps,” Pranav Agarwal, independent director at Jetking Infotrain India — the country’s first listed Bitcoin treasury company, told Decrypt.
CA Sonu Jain, chief risk and compliance officer at 9Point Capital, told Decrypt the expectation of unchanged crypto taxes stemmed from the government’s current priorities, which focus “not on revisiting crypto tax policy but on strengthening enforcement, reporting, and compliance.”
India is coordinating policy discussions “at the G20 level on a comprehensive regulatory framework for crypto assets,” Jain said, adding that any revisions to tax rules are likely only once “such regulations are in place.”
While tax rates remain untouched, Budget 2026 did ease one enforcement provision.
Criminal liability for TDS defaults, previously punishable with up to seven years’ imprisonment, has been reduced to a maximum of two years, with courts now allowed to convert violations into monetary penalties.
Jain called the move “a big positive for P2P traders who have been non-compliant.”
The regime had already tightened in Budget 2025, when undisclosed crypto gains were brought under Section 158B, enabling retrospective audits going back 48 months and penalties of up to 70% on unpaid taxes.
However, the budget introduced new penalty provisions for non-compliance with crypto asset transaction reporting requirements under Section 509 of the Income Tax Act, 2025.
Entities failing to furnish statements face a penalty of $2.19 (₹200) per day, while those providing inaccurate information or failing to correct inaccuracies will be penalized $546 (₹50,000), taking effect from the 1st of April.
“Taxation was introduced as an interim step until clear and comprehensive regulations are defined,” Sudhakar Lakshmanaraja, founder of Digital South Trust, a Web3 policy advocacy body, told Decrypt, echoing Jain’s sentiments.
Amid ongoing volatility in crypto and Web3 markets, he said India’s approach “reflects policy maturity,” and that “regulatory certainty at this stage strengthens compliance” while supporting long-term ecosystem growth.
