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.
‘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:
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.
