New Delhi: Finance Minister Nirmala Sitharaman on Sunday unveiled a key reform in Budget 2026 focused on the virtual digital asset (VDA) sector, proposing a penalty framework for crypto exchanges and related entities that fail to adhere to reporting requirements or furnish incorrect information.
Under the proposed amendments linked to Section 509 of the Income-tax Act, 2025, entities required to file periodic statements detailing crypto transactions with the Income Tax Department will face a penalty of ₹200 per day for failing to furnish the prescribed statement within the stipulated time. A flat penalty of ₹50,000 will be imposed where inaccurate particulars are provided and not corrected within the permitted timeframe.
“These penalty provisions are meant to ensure compliance with the provisions of Section 509 … and create a deterrence for non-furnishing of statements or furnishing inaccurate information in respect of crypto assets,” the Finance Minister said during her budget speech.
While crypto reporting obligations previously existed, there was no specific enforcement mechanism or penalty regime for lapses. The latest budgetary move formalises punitive measures that will apply from April 1, 2026, tightening the regulatory framework around virtual assets and aligning crypto reporting with mainstream tax compliance norms.
Industry reactions have been mixed. Some platforms view the step as a “positive milestone” that reinforces a compliance-first approach, enhancing investor confidence and reducing reporting risks in line with international norms. Others caution that the added compliance burden and penalty risk, on top of existing tax obligations, could strain smaller startups with limited resources.
The broader crypto taxation regime remains unchanged in the Budget, with existing tax rates and TDS provisions intact, leaving market participants hopeful that future policy discussions will focus on balancing regulatory rigor with innovation-friendly reforms.