In its 2026–27 federal budget, the Indian government confirmed it will continue to apply a uniform 30% tax on crypto asset gains, alongside a 1% tax deducted at source (TDS) on transactions. This decision signals that long-standing industry calls for tax relief or structural reform have not been addressed since the framework was first introduced.
High effective tax rates combined with frequent transaction-level deductions are widely viewed as key factors constraining domestic crypto trading activity in India.
New Reporting Penalties Strengthen Tax Compliance Enforcement
Beyond maintaining existing tax rates, the budget also introduces stricter reporting penalties, effective from April 1, 2026. Individuals or entities that fail to properly disclose crypto asset transactions under Section 509 of the Income Tax Act will face enhanced sanctions.
These include: – INR 200 per day for delayed or missing disclosures – A fixed penalty of up to INR 50,000
The stated objective is to improve reporting completeness and traceability, reducing underreporting and omissions in crypto-related tax filings.
Compliance Emphasized as Market Watches Rising Trading Friction
India’s finance authorities emphasized that these measures aim to strengthen tax compliance and regulatory enforcement, ensuring crypto transactions fall within a unified reporting and audit framework. However, market participants remain concerned that high tax burdens combined with tighter disclosure requirements may further increase trading friction and suppress legitimate market liquidity.
Previous trends already suggest that some trading activity has shifted toward offshore platforms or on-chain peer-to-peer channels, partly to mitigate frequent tax deductions.
Tax Oversight Drives Demand for On-Chain Transparency
In an environment characterized by high taxation and strict compliance, accurately documenting transaction origins, fund flows, and counterparties has become a practical necessity for market participants. Through on-chain data analysis and address behavior monitoring, entities can better organize transaction records and reduce compliance risks arising from incomplete disclosures.
Against this backdrop, on-chain transaction monitoring and risk identification tools such as Trustformer KYT are increasingly used to help interpret complex fund flow structures and provide data support for tax and regulatory responses.
India’s Crypto Market Remains in an Adjustment Phase
Analysts note that India’s current crypto policy stance prioritizes risk containment and enforcement intensity, rather than market stimulation. As the new fiscal year approaches, the practical impact of these tax rules—and their long-term influence on trading behavior—remains under close observation.