India's 2026-27 Budget Maintains 30% Tax Rate on Crypto Gains and Tightens Compliance Penalties

The Indian cryptocurrency sector will face an unchanged regulatory landscape in 2026. The 2026-27 federal budget confirmed the maintenance of a 30% tax rate on cryptocurrency gains, accompanied by a 1% withholding tax, leaving sector tax reduction expectations unaddressed. Despite stable tax rates, India introduces a stricter compliance regime that could have significant consequences for market participants.

Tax Structure Remains at 30%

The government’s decision to maintain the 30% rate contradicts ongoing industry calls for lower rates. According to information released by ChainCatcher, there have been no changes to the tax rates, maintaining the stance adopted in previous years. This scenario reinforces that the country continues to have one of the highest crypto gains tax burdens globally, causing frustration among investors and operators who expected more competitive policies.

In addition to the 30% gains tax, the government continues to require a 1% withholding on transactions, a mechanism aimed at monitoring financial flows in the sector. The combination of these two rates creates a tax burden that discourages high-volume operations, market analysts warn.

Strict Penalties Up to 50,000 Rupees Come Into Effect

The real novelty lies in penalties introduced under Section 509 of the Income Tax Act, effective from April 1, 2026. The government established a progressive fine regime for entities that fail to accurately report crypto asset transactions or do not comply with regulatory requirements.

Those who do not submit mandatory reports will face a daily fine of 200 rupees (approximately $2.20) until the irregularity is rectified. For more serious cases, where information is incorrect or errors are not corrected after identification, a fixed penalty of 50,000 rupees (about $545) will be applied. This dual sanctions structure aims to create a progressive deterrent against non-compliance.

Government officials argue that these measures aim to increase regulatory compliance in the sector. However, market participants warn that the severity of these penalties, combined with the already high 30% rates, could intensify regulatory friction for individual traders and small platforms operating in India.

Impact on Compliance and Market Behavior

The implementation of this penalty regime marks a shift in Indian regulatory strategy, signaling a move from a solely tax-focused approach to a model that also prioritizes operational compliance. Small traders and independent platforms, already facing significant administrative challenges, may see their operating costs substantially increase.

The combination of high rates (30% on gains) and severe fines (up to 50,000 rupees for non-compliance) is structured to make record accuracy imperative, not optional. This could lead to market consolidation around larger platforms with robust administrative structures, while smaller operators face additional competitive pressure.