India Keeps 30% Crypto Tax, Adds $545 Penalty for Missed Reports

India just told its crypto industry: we're not cutting your 30% tax burden, but we'll gladly fine you $2 daily if you mess up your paperwork. It's a masterclass in adding sticks without offering any carrots.

Same High Taxes, New Penalties

India's Union Budget for 2026-27 delivered a clear message to crypto traders and exchanges: the government isn't budging on its punitive tax structure. The 30% flat tax on crypto gains remains untouched, as does the 1% tax deducted at source (TDS) on all trades.

What's new? Starting April 1, 2026, entities required to report crypto transactions under Section 509 of the Income-tax Act will face monetary penalties for lapses. Miss a filing deadline? That's ₹200 per day (roughly $2.20) until you comply. Submit incorrect information or fail to fix flagged errors? A flat ₹50,000 penalty (about $545) awaits.

The Finance Ministry frames this as strengthening compliance and discouraging "inaccurate or incomplete reporting." But industry players see it differently: more bureaucratic burden without addressing the fundamental issues that are driving trading activity offshore.

Industry's Growing Frustration

The crypto industry's disappointment is palpable. After months of lobbying for relief from what they consider punitive taxation, they got more penalties instead. The existing framework creates a peculiar situation where traders pay taxes on transactions regardless of whether they make profits, and losses can't be offset against gains.

CoinSwitch co-founder Ashish Singhal captured the industry sentiment: "The current tax framework presents challenges for retail participants by taxing transactions without recognising losses, creating friction rather than fairness." He advocates for reducing TDS from 1% to 0.01% and raising the threshold to ₹5 lakh to protect small investors.

The 1% TDS is particularly problematic for active traders. Imagine paying a fee every time you trade, regardless of profit or loss, with no way to recover those payments if your overall portfolio is down. It's like being charged admission to a casino whether you win or lose.

Global Context: Swimming Against the Tide

India's approach stands in stark contrast to global trends. While countries like Singapore, Switzerland, and even traditionally conservative jurisdictions are creating crypto-friendly frameworks to attract digital asset businesses, India is doubling down on deterrence.

This isn't just about tax revenue—it's about control. India is simultaneously developing its Central Bank Digital Currency (CBDC), the digital rupee, while making private cryptocurrencies less attractive. The strategy appears designed to channel digital payment innovation through government-controlled channels rather than decentralized alternatives.

The penalty amounts are telling. ₹200 daily might sound modest to global exchanges, but it's targeted at smaller, domestic players who lack the resources to navigate complex compliance requirements. It's a selective pressure that could consolidate the market around larger, better-resourced players.

The Compliance Trap

What's particularly striking is how the government is creating a compliance maze while maintaining tax barriers. Crypto businesses now face the worst of both worlds: high operational costs from taxation and increased administrative burden from reporting requirements.

For retail investors, the message is clear: the government tolerates crypto trading but won't make it easy or profitable. The 30% tax rate—higher than long-term capital gains on stocks—combined with the 1% TDS creates a significant drag on returns before considering the new compliance risks.

This approach raises questions about India's broader digital economy strategy. While promoting fintech innovation in traditional banking and payments, the government seems determined to keep crypto at arm's length.