vda

The Union Budget 2026, presented on February 1, 2026, provided no tax relief for India’s estimated 90 million crypto investors, maintaining the existing high tax rates while introducing new penalties for reporting non-compliance. Despite significant industry lobbying for a reduction in the 1% TDS and the ability to offset losses, Finance Minister Nirmala Sitharaman focused instead on tightening the regulatory net under the new Income Tax Act, 2025, which takes effect from April 1, 2026.
Key Crypto Tax Provisions for 2026
The core tax structure for Virtual Digital Assets (VDAs) remains unchanged from previous years:
30% Flat Tax: A flat tax of 30% (plus applicable surcharge and 4% cess) continues to apply to all profits from the transfer of VDAs, regardless of the holding period.
1% TDS: The 1% Tax Deducted at Source (TDS) on every transaction remains in place to track trades, a measure that the industry argues continues to drain market liquidity.
No Loss Set-off: Investors still cannot offset losses from one crypto asset against gains from another, nor can they carry forward losses to future years.
Limited Deductions: Only the cost of acquisition is allowed as a deduction; other expenses like mining or transaction fees are not deductible.
New Penalties for Reporting Entities
The Finance Bill 2026 introduced specific penalties for crypto exchanges and platforms (Reporting Entities) to ensure accurate transaction reporting:
Daily Penalty: A fine of ₹200 per day will be levied for failure to furnish required transaction statements.
Inaccuracy Fine: A fixed penalty of ₹50,000 will be imposed for providing inaccurate particulars in reporting statements.
Effective Date: These new penalty provisions under Section 509 of the Income Tax Act, 2025, come into force starting April 1, 2026.
Industry Reaction and Market Context
The industry has expressed disappointment, noting that while the government is formalising compliance, it is ignoring the "economic rationalisation" needed for growth.
Liquidity Migration: Experts warned that the lack of tax relief continues to push trading volumes to non-compliant offshore platforms, leaving domestic exchanges struggling for liquidity.
Investor Sentiment: Recent data showed nearly 49.09% of Indian crypto users reported net capital losses in the previous fiscal year, yet many still faced tax liabilities due to the inability to offset those losses.
Regulatory Direction: Stakeholders viewed the inclusion of penalties as a "positive milestone" for formalising the sector, but cautioned that true growth requires treating crypto more like traditional financial assets.
#unionbudget
#CryptoTaxIndia
#NirmalaSitharaman
#VDA