India’s crypto market is entering a stricter compliance phase in 2026 as high taxes, transaction-level reporting and new penalties make record-keeping increasingly important for investors and trading platforms.
Virtual Digital Asset gains remain subject to a 30% tax plus applicable surcharge and 4% cess. The Income Tax Department also requires VDA income to be reported transaction-wise through Schedule VDA.
The pressure is already influencing where Indians trade. According to a KoinX report, 72.66% of India’s Rs. 51,252 crore crypto trading volume in FY25 went through offshore exchanges.
TDS Keeps Transaction Tracking in Focus
India has retained its 1% TDS framework on VDA transfers in 2026. However, an important procedural change took effect on April 1: transactions from that date fall under the Income Tax Act, 2025 rather than the old Section 194S framework. The tax department says the rates and thresholds themselves remain unchanged.
For applicable individual and HUF transactions, the new Form 141 replaces Form 26QE for post-April 1 VDA deductions. The established filing timeline remains 30 days from the end of the month in which TDS is deducted.
Finance Minister Nirmala Sitharaman previously explained the logic behind crypto taxation, saying, “We haven’t said that this is currency. We haven’t said that this has intrinsic value, but certain operations are taxable for the sovereign and that is why we have taxed.”
Crypto Reporting Penalties Rise
The 2026 framework also increases pressure on crypto service providers. Under Section 509 reporting requirements, entities that fail to furnish prescribed crypto-asset statements can face a Rs. 200-per-day penalty, while inaccurate information that is not corrected can attract a Rs. 50,000 penalty. These provisions took effect on April 1, 2026.
Importantly, these particular penalties target reporting crypto-asset service providers, rather than automatically imposing Rs. 50,000 fines on every individual trader.
Closer Crypto Tax Watch
Compliance risks extend beyond domestic exchanges. Reuters reported in July that India had nearly 39 million crypto holders with around $2.1 billion in assets by May 2026. Tax authorities also found that fewer than one-quarter of 645,000 people who traded crypto in FY2023 had reported those transactions in their returns.
Also Read: WazirX Launches Free Crypto Tax Tool Before ITR Deadline
Conclusion
For Indian crypto investors, survival mode increasingly means maintaining complete exchange and wallet histories, reconciling TDS records and reporting every taxable transaction correctly. With exchanges facing stronger disclosure obligations and authorities gaining more transaction data, relying on fragmented records or offshore platforms is becoming a significantly riskier strategy.
Disclaimer : Crypto News India does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.
