India Budget 2026 Crypto Provisions: 30% VDA Tax, 1% TDS, and Penalty Regime for Reporting

Overview of Budget 2026 crypto provisions in India: 30% tax on virtual digital asset transfers, 1% TDS, new penalties for non-compliance, and regulatory implications for traders and reporting entities.

Rich by Coin

2026-03-14

Budget 2026 proposes a penalty framework for crypto-asset reporting, with Rs 200 per day for continuing default and Rs 50,000 for inaccuracies or non-compliance, effective from 1 April 2026. The reporting obligation under section 509 is aimed at prescribed reporting entities rather than every retail trader, but it will tighten compliance on exchanges and intermediaries and likely boost third-party crypto-transaction information to the Department. Assessees should proactively reconcile exchange histories, wallet transfers, 194S TDS reflected in Form 26AS, Schedule VDA, and other portal data before filing the return.

Under the VDA regime introduced by Finance Act 2022, gains from transfer of virtual digital assets are taxed at 30% under section 115BBH, with a 1% TDS on transfer consideration under section 194S. The definition of VDA has been refined, with certain items excluded by notification; buying and selling Bitcoin, Ether, Solana, meme coins, or similar crypto-assets falls under this regime as the primary tax consideration, with a flat 30% rate plus surcharge and 4% cess, and no concessional capital-gains treatment. The ITR forms and Schedule VDA guide reporting, with ITR-2 typically used for individuals without business income and ITR-3 for those with business-like activity, and the 1% TDS acts as a tax credit rather than final tax. The law restricts deductions to the cost of acquisition only; no loss set-off or carry-forward relief is allowed, and many typical business expenses cannot be deducted.

Presumptive taxation under sections 44AD/44ADA should not be assumed for VDA profits, since 115BBH governs the regime. If crypto activity is treated as a business, audit considerations and turnover thresholds may apply separate from the 30% rate, and VDA is also included as property under section 56(2)(x) for gift taxation, making transfer and gift scenarios taxable. Practical compliance includes maintaining precise purchase records, reconciling 194S TDS credits in Form 26AS, paying timely advance tax to avoid interest under 234B/234C, and selecting the correct head of income in ITR-2 or ITR-3; do not rely on holding-period benefits or deduction of routine trading expenses. A practical checklist for crypto traders includes downloading exchange histories, preparing per-transaction gain statements, reconciling TDS with Form 26AS, and filing Schedule VDA accurately.