“To ensure compliance with the provisions of Section 509 of the Income Tax Act, 2025 and to create a deterrent for failure to furnish a declaration or for furnishing incorrect information in respect of Crypto Assets, such declaration is proposed to introduce a provision of penalty. Fine of Rs. 200 per day for non-furnishing of declaration and Rs. 50,000 for furnishing incorrect particulars and failure to comply with declaration. It is proposed to to correct such inaccuracy,” she noted. The change would come into effect from April 1, 2026.
Ashish Singhal, the co-founder of CoinSwitch, argued that the penalty provisions are a positive milestone for the crypto industry.
“By imposing a fine of ₹200 per day for reporting delays and a fine of ₹50,000 for inaccuracies, the government has formalized high tax compliance and reporting standards for both users and VASPs. This validates the ‘Compliance-First’ model of Indian platforms like ours, protecting users from reporting risks and aligning with compliance objectives,” he said.
Similarly, Mudrex CEO Edul Patel noted that the proposed penalties for non-disclosure and misreporting of crypto assets reflect a broader policy shift towards strengthening compliance and transparency in India’s digital asset ecosystem.
Well-defined measures to address non-compliance strengthen accountability and bring digital asset reporting closer to established financial standards.
“This clarity will enable exchanges and market participants to build compliance frameworks with greater confidence and operational certainty. Previously, the Financial Intelligence Unit-India (FIU-IND) updated its AML and CFT guidelines in January 2026, classifying crypto exchanges and VDA service providers as reporting entities under the PMLA. Taken together, these measures reflect a coherent regulatory direction that builds confidence, increases accountability and supports the long-term, responsible growth of India’s digital asset industry, Karkara, COO, ZebPay, said.
However, while compliance and oversight have tightened, real growth requires economic rationalization to keep Web3 innovation and talent in India.
“The 1% TDS, lack of compensation for losses and flat capital gains rate of 30% create an asymmetric environment for true participation. These measures risk driving Indian capital to non-compliant offshore platforms, leaving users vulnerable to legal and financial scrutiny,” Singhal warned.
Published on February 1, 2026
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