In the Union Budget 2026, Finance Minister Nirmala Sitharaman has indeed moved from a policy of mere “taxation” to aggressive “enforcement and reporting.” The points for reporting and penalties are part of a new, structured compliance framework designed to bring crypto exchanges on par with banks.
Here are the detailed points on the new penalties and major crypto updates from Budget 2026:
New Penalty Framework for Crypto Exchanges
To ensure every single trade is tracked and reported to the Income Tax Department, the government has introduced a two-tier penalty system under Section 446 (proposed amendment), effective from April 1, 2026:
- Delay in Reporting (The ₹200 Fine): If a crypto exchange or reporting entity fails to furnish the “Statement of Financial Transactions” (SFT) within the prescribed time, they will be fined ₹200 per day for the duration of the delay.
- Non-Reporting or Inaccurate Data (The ₹50,000 Fine): If an exchange provides “inaccurate particulars” (wrong transaction values, missing PANs, etc.) and fails to correct them, or if they fail to report altogether after a notice, a flat penalty of ₹50,000 will be levied.
- Target Entities: This doesn’t just apply to Indian crypto exchanges like SunCrypto, CoinDCX, or WazirX; it also targets wallet providers and intermediaries who facilitate Virtual Digital Asset (VDA) transfers.
Major Crypto Updates in Budget 2026
While the industry was hoping for tax relief to offset the new FnO transaction costs, the budget doubled down on the existing restrictive regime:
- Status Quo on 30% Tax: The flat 30% tax on VDA income (Section 115BBH) remains unchanged. There is still no deduction for any expenses other than the cost of acquisition.
- No Loss Set-off: The government ignored the plea to allow traders to set off losses in one coin against gains in another. Each “profit” is taxed, while “losses” must be absorbed entirely by the trader.
- 1% TDS Continues: The 1% TDS on every transaction remains the primary tool for the government to “tag” the trail of money.
- Widening the “VDA” Definition: The definition of virtual digital assets has been expanded to explicitly include distributed ledger technology (DLT) assets. This ensures that newer tech like DeFi protocols and specialized NFTs don’t slip through legal loopholes.
- Jail Term for TDS Defaults: A significant update—failure to deposit the 1% TDS collected from users can now lead to prosecution and up to two years of imprisonment if the amount exceeds ₹50 lakh.
The “FnO to Crypto” Shift: A Trap?
You mentioned traders shifting from Stock FnO to crypto FnO. While the 2026 Budget makes FnO more expensive via STT, it makes crypto more dangerous via reporting:
- Transparency: With the new ₹200/day and ₹50k penalties, exchanges will report everything. There is no longer any “invisible” crypto trading in India.
- Tax Load: In FnO, you are taxed on net profit at slab rates. In crypto, you are taxed at a flat 30% on every winning trade without considering your losing trades.
Disclaimer: Crypto products & NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.