The wait for crypto tax relief in India got longer. Budget 2026 kept the existing framework intact while adding sharper teeth to enforcement. If you’re holding Bitcoin, Ethereum, or any digital asset, here’s what changed and what you need to know to file crypto tax in India without running into trouble.
Indian Finance Minister Nirmala Sitharaman delivered her ninth budget on February 1, 2026, and the crypto community wasn’t celebrating. The 30% flat tax on gains stayed put. So did the 1% TDS (tax deducted at source) that bites into every transaction. What changed? The government added penalties that’ll hit platforms and exchanges hard if they mess up reporting.
What’s New in the Draft Framework?
Starting April 1, 2026, crypto exchanges and reporting entities will face financial consequences for missing deadlines or submitting incorrect information. Under Section 509 of the Income Tax Act 2025, the penalties break down like this:
Daily fines of Rs 200 kick in when platforms don’t submit required transaction statements on time. Get the details wrong or skip corrections? That’s a flat Rs 50,000 penalty. Before this, there were reporting requirements but no real financial sting for non-compliance.
The Draft Income Tax Rules 2026 lay it all out in Rules 241-244. According to Rule 243, crypto exchanges (technically called “reporting crypto-asset service providers”) have to submit Form No. 167 every year by May 31st. This form contains transaction details from the previous calendar year. Skip that date, and the Rs 200 daily penalty clock starts ticking.
The Tax Structure That Refuses to Budge
When you file crypto tax in India, you’re dealing with one of the world’s strictest regimes. Profits from selling, swapping, or spending crypto get hit with a 30% tax rate. No deductions allowed except for your purchase cost. Made money on three trades but lost on four? Too bad. You can’t offset those losses.
The 1% TDS applies to every transaction above Rs 50,000 (or Rs 10,000 for certain people) in a financial year. For high-frequency traders, this creates a liquidity nightmare. Data from KoinX shows that in FY25, total TDS collections hit Rs 511.83 crore. But here’s the kicker: nearly half of those who paid ended the year with net losses.
Punit Agarwal, CEO of KoinX, points out the absurdity: “Nearly half of investors ended the year in losses but still paid tax on isolated gains. No net gain means no capital gains tax. This principle applies across asset classes.”
Also Read: India Leads Worldwide Crypto Adoption: Outpacing China & US
How Exchanges Must Report Your Transactions?
Rule 241 defines “relevant crypto-asset” as any crypto that isn’t a Central Bank Digital Currency or a “specified electronic money product.” This covers Bitcoin, Ethereum, and virtually every altcoin you’re trading.
Rule 243 requires exchanges to report nine categories of information per user, including aggregate amounts for acquisitions and disposals against fiat currency, crypto-to-crypto swaps, and even retail payments above $50,000. The rules specify that reporting must include “the full name of the type of relevant crypto-asset” and aggregate fair market values for each transaction type.
What’s interesting: Rule 242 lets Indian exchanges skip domestic reporting if they’ve already completed equivalent reporting in a “partner jurisdiction.” This acknowledges that global platforms operate across multiple countries, but India still wants its data.
How to Actually File Crypto Tax in India?
The process uses either Form ITR-2 (for capital gains) or ITR-3 (for business income). Both have a dedicated “Schedule VDA” section where you report your crypto activity.
You’ll need records of every transaction: purchase price, sale price, dates, and platforms used. The financial year runs from April 1 to March 31. For FY 2025-26, you’ve got until July 31, 2026, to file. If you’re being audited, that extends to October 31, 2026.
Now here’s something most people don’t realize. The Income Tax Department has this AI system called Project Insight. It cross-checks what your exchange reports against what you actually declare. If there’s a gap bigger than Rs 1 lakh, you’re likely getting flagged. And yes, tax officers are now learning blockchain forensics through tie-ups with places like the National Forensic Science University. They can trace wallet movements.
The Draft Rules add another layer. Rule 244 establishes “due diligence procedures” requiring exchanges to collect self-certifications from users about their tax residency. If you’re an Indian resident trading on a foreign exchange, that platform now needs to verify your status and report accordingly.
Why Traders Are Moving Offshore?
Industry data suggests nearly three-quarters of India’s $6.1 billion in crypto trading volume has shifted to offshore platforms. The reason? Lower costs and fewer restrictions abroad.
Ashish Singhal, who co-founded CoinSwitch, put it bluntly in an email: “The current tax framework presents challenges for retail participants by taxing transactions without recognizing losses, creating friction rather than fairness.”
Don’t expect changes anytime soon, though. Officials say any major tax revisions will only come after comprehensive regulations are in place, likely coordinated through G20-level discussions. Until then, when you file crypto tax in India, you’re working within this rigid structure.
Also Read: 5 Crypto Tax-Free Countries in 2025 You Can Move to for Zero Crypto Taxes
What Happens If You Don’t Comply?
The Income Tax Department has strengthened its enforcement toolkit. Budget 2025 brought undisclosed crypto gains under Section 158B, enabling retrospective audits going back 48 months. Penalties can reach 70% of unpaid taxes.
Crypto wallets can now be inspected during tax raids. The department sends “nudges” (gentle reminders) when your reported income doesn’t match TDS records. Ignore those, and formal notices follow.
Rule 243(12) of the Draft Rules adds a specific requirement: exchanges must retain transaction records for at least seven years after the reporting period ends. This gives authorities a long window to cross-check your filings against platform data.
One positive development: criminal liability for TDS defaults dropped from seven years imprisonment to two years maximum, with courts allowed to convert violations into monetary penalties instead.
Filing Tips to Avoid Problems
First, maintain detailed records. Every trade matters. Use crypto tax calculators like Koinly or KoinX to track transactions automatically across multiple exchanges.
Second, file on time. Don’t wait until the deadline. The department’s systems flag late filers, and the scrutiny increases.
Third, report everything. Staking rewards, airdrops, and mining income, all taxable. You’ll pay 30% when you eventually sell those rewards, but receiving them might also trigger income tax at your slab rate.
Finally, understand that the rules apply even if you never convert to rupees. Crypto-to-crypto trades count. Both buyer and seller face the 1% TDS hit on such transactions.
Under Rule 244’s due diligence requirements, you may need to provide self-certification forms to exchanges confirming your tax residency. Keep copies. If there’s a “change of circumstances” (like moving abroad), you have 90 days to update your information with the platform.
What is the deadline to file crypto tax in India for FY 2025-26?
July 31, 2026, if you’re filing normally. Get extended to October 31, 2026, if you’re under audit. Crypto exchanges have an earlier date—they need to submit their reports by May 31, 2026, per Rule 243.
Can I offset crypto losses against other income?
No. Crypto losses can’t be set off against any other income or carried forward under current rules.
What happens if I traded on a foreign exchange?
You still need to file crypto tax in India on those transactions. The 30% tax applies to all Virtual Digital Assets regardless of platform location. Under the Draft Rules, foreign exchanges serving Indian users may also have reporting obligations.
Do I pay tax on crypto I’m just holding?
No. Tax applies only when you sell, swap, spend, or gift your crypto. Simply holding doesn’t trigger tax liability.
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Disclaimer:
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