India’s Union Budget 2026: Crypto Taxation Regime Stands Firm – No Relief for Digital Asset Investors

Hold the champagne, crypto traders. India's 2026 Union Budget just delivered a sobering reality check—no changes to the existing cryptocurrency taxation framework. The status quo remains, locking digital assets into the same regulatory box they've occupied since 2022.

The 1% TDS and 30% Tax: Still the Law of the Land

Finance Minister Nirmala Sitharaman's budget speech confirmed what many in the industry feared: the controversial 1% Tax Deducted at Source (TDS) on every crypto transaction and the steep 30% tax on gains aren't going anywhere. The government's stance is clear—it views crypto profits as speculative windfalls, not long-term investments worthy of gentler capital gains treatment. This policy effectively treats your Bitcoin gains the same way it treats lottery winnings. A cynical take? Perhaps, but one that highlights the finance ministry's enduring skepticism.

Market Reaction: A Collective Sigh

The announcement triggered a predictable wave of disappointment across Indian crypto exchanges and investor forums. Hopes for a reduced TDS rate—or even a raised threshold—were dashed. The budget signals a continued focus on tracking and taxing crypto activity, not on fostering innovation or integrating digital assets into the mainstream financial fold. For now, the on-chain economy in India remains heavily monitored and heavily taxed.

What This Means for India's Crypto Future

This budgetary inertia creates a paradox. While the government explores a digital rupee and blockchain pilots, it maintains a tax regime that critics argue stifles the very ecosystem it's experimenting with. The message is one of control over encouragement. For bullish practitioners, it's a frustrating hurdle—another case of traditional finance moving at a glacial pace while technology races ahead. The 'wait and see' approach continues, leaving India's crypto potential firmly on hold.

India retains existing crypto framework despite calls for reform

During the highly anticipated announcement, the Finance Minister did not announce any revisions to the 1% TDS (tax deducted at source) on crypto transactions or the restrictions on offsetting losses.

According to industry experts, these policies have long since posed challenges to investors and traders in the country’s crypto sector. Edu Patel, CEO of Mudrex, said the decision to maintain the tax framework shows continuity.

The CEO noted that the industry was expecting reforms that WOULD improve market participation and onshore liquidity. Patel also said that while the sector has been growing despite the regulatory and tax challenges, a reform of transaction taxes and enabling loss offsets would have strengthened the country’s competitive edge in the global digital asset economy.

However, he mentioned that he is confident that continued dialogue between policymakers and the industry will help shape the framework in the future.

Nischal Shetty, founder of WazirX, also shared a similar thought. Shetty noted that sticking to the existing framework means traders and investors are still faced with challenges in the crypto market. He noted that the decision means that aspects like liquidity, participation, and competitiveness on the global stage would be greatly affected.

Like Patel, Shetty remains hopeful that dialogue with the right authorities would address all these issues when the time comes.

Industry experts hail penalties for compliance

In her Budget 2026, the Indian Finance Minister said that to ensure that traders comply with the provisions of Section 509 of the Income Tax Act, and create deterrence for non-reporting of statements or for reporting inaccurate information with respect to crypto assets, she is introducing a penalty provision.

Under this provision, it will introduce a penalty of Rs. 200 per day for non-reporting of statements and Rs. 50,000 for reporting inaccurate statements and failure to correct the statement.

The minister noted that the new amendment will take effect from April 1, 2026. Ashish Singhal, co-founder of CoinSwitch, mentioned that the introduction of specific penalties for not reporting crypto transactions is a right step for the crypto industry.

He said that by mandating and enforcing the penalties for not reporting transactions and inaccurate reporting for tax purposes, the government has formalized a new standard of tax compliance and reporting for both users and crypto exchange platforms.

While compliance and surveillance have grown, Singhal added that true growth requires economic moves that would keep Web3 companies and talents within India.

The Income Tax Act contains provisions under Sections 115BBH and 194S, which govern the taxation of Virtual Digital Assets (VDAs) like crypto, NFTs, and other tokens in India. VDA gains will continue to be taxed at a flat rate of 30%, while 1% will be deducted at source on every transaction. In addition, non-trading income will also be taxed as per the individual’s income slab.

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