Fail to report crypto assets, correct mistakes or furnish inaccurate particulars? Here's how much penalty you may pay

Union Budget 2026: Finance Minister Nirmala Sitharaman has proposed penalty provision for non-compliance in reporting of cryptocurrency assets in line with the new Income-Tax (I-T) Act scheduled to come into effect from 1 April.

During her Budget speech, she noted, “To ensure compliance with the provisions of Section 509 of the Income-tax Act, 2025 and create a deterrence for non-furnishing of statement or for furnishing inaccurate information in respect of crypto assets in such statement, it is proposed to introduce a penalty provision.”

What does Section 509 of new Income-Tax Act stipulate?

Section 509 of the new I-T Act deals with “Penalty provision for non-furnishing of statement or furnishing inaccurate information in a statement on transaction of crypto assets”.

The section prescribes obligation to furnish information on transaction of crypto-asset by reporting entity. The proposed penalty comes after amending section 446 of the Act and will take effect from 1 April 2026.

What is the penalty imposed?

• The new I-T Act's Section 509 proposes penalty of ₹200/day for non-furnishing of statement.
• Further, it also proposes to levy ₹50,000 penalty for furnishing inaccurate particulars and failure to correct such inaccuracy.

‘Positive milestone for the crypto industry’, says stakeholder

Ashish Singhal, Co-founder of CoinSwitch called the move a “positive milestone for the crypto industry”, noting that by imposing penalties, the government has “formalised high standards of tax compliance and reporting for both users and VASPs”.

He however, added that while compliance and surveillance have tightened, true growth requires economic rationalisation. “The 1% TDS, lack of offset of losses and the 30% flat capital gains rate, create an asymmetric environment for genuine participation. Theys risk driving Indian capital toward non-compliant offshore platforms, leaving users vulnerable to legal and financial scrutiny,” he added.

Budget expectations from the sector were:

• Reduction in TDS on VDA transactions from 1%
• Raising the TDS threshold to ₹5 lakh
• Review of the flat 30% tax on VDA gains
• Allowance of offset for loss from VDA transactions
• Aligning capital gains taxation with income slabs
• A dedicated Crypto Bill in India
• Alignment of SEBI guidelines for companies that hold BTC on balance sheets

What is new I-T Act — Here's all you need to know

The Income Tax Act, 2025, replacing the 1961 law was notified by the Centre on Friday, August 22, in its Official Gazette. The Act was passed by Parliament during the Monsoon Session last year and comes into effect from 1 April 2026.

• The new Act, 2025, seeks to simplify the 1961 Act to give rise to a shorter, clearer, and more concise document that can be beneficial for taxpayers.
• It has done away with redundant provisions and archaic language, introducing a simpler language for common people. It also reduces the number of Sections from 819 in the Income Tax Act of 1961 to 536, while the number of chapters have been reduced from 47 to 23.
• A major change is the renaming of Assessment Year (AY) and Financial Year (FY) to Tax Year, so as to avoid confusions.
• It retains the existing slab rates for salaried individuals, businesspersons, professionals and other taxpayers.
• The Centre has also retained the controversial provision where income tax officials will have the authority to access to your emails and social media during search operations or while seizing, thus retaining the definition of “virtual digital space”.
• The number of words had been reduced from 5.12 lakh to 2.6 lakh in the new Income Tax Act, and for the first time, it introduces 39 new tables and 40 new formulas, replacing the dense text of the 1961 law to enhance clarity.