India keeps crypto taxes unchanged at 30% in Budget 2026

India’s Union Budget for 2026–27, introduced on 1 February (Sunday), has left the country’s controversial crypto tax regime untouched, while introducing a new penalty framework to tighten reporting compliance and unveiling a broader push to position India as a long-term hub for AI, data centres, and semiconductor manufacturing.

Despite sustained lobbying from the domestic crypto industry, the government chose to retain the existing 30 percent tax on crypto gains and the 1 percent tax deducted at source (TDS) on transactions. However, amendments proposed in the Finance Bill, 2026, signal a sharper enforcement approach toward crypto-asset reporting.

New penalties target crypto transaction reporting

Under the proposed amendments, entities required to report crypto-asset transactions under Section 509 of the Income-tax Act would face financial penalties for non-compliance, effective 1 April 2026.

As noted in the Budget, failure to file the mandated statement would attract a penalty of ₹200 ($2.2) per day for the duration of the default. Meanwhile, filing incorrect information or failing to correct errors after notification would result in a flat penalty of ₹50,000 ($555).

The changes would be implemented through amendments to Section 446 of the Act, with the government stating that the measures are intended to discourage inaccurate or incomplete disclosures and improve oversight of crypto activity.

While enforcement has been strengthened, the decision to leave headline taxes unchanged disappointed industry participants, many of whom argue that the current structure suppresses trading volumes, reduces domestic liquidity, and pushes activity toward offshore platforms.

Budget doubles down on AI, data centres 

Alongside its crypto stance, the Budget outlines a long-term technology and infrastructure strategy centred on artificial intelligence, cloud services, and semiconductor manufacturing.

Union Minister for Electronics and Information Technology Ashwini Vaishnaw said the government views data centres, particularly AI data centres, as foundational infrastructure, noting that investment commitments of around $70 billion are already underway, with an additional $90 billion announced.

To attract global operators, the Budget proposes a tax holiday until 2047 for foreign companies providing cloud services to international customers using Indian data centres, provided services to Indian customers are routed through domestic reseller entities. A 15 percent safe harbour on costs has also been proposed where Indian data centre providers are related entities.

Semiconductor Mission 2.0 and manufacturing incentives

The Budget also announced the launch of India Semiconductor Mission (ISM) 2.0, backed by an allocation of ₹1,000 crore for FY 2026–27.

ISM 2.0 expands the scope beyond fabrication to include:

• Domestic manufacturing of semiconductor equipment and materials
• A larger semiconductor design ecosystem
• Expanded talent development initiatives

The government also increased funding for the Electronics Components Manufacturing Scheme (ECMS) from ₹22,000 crore to ₹40,000 crore, following unexpectedly strong industry demand.

Industry view: infrastructure and AI as growth enablers

Commenting on the Budget, Ankit Goel, Chairman & Founder of Space World Group, said the measures reflect a structural shift in how India is approaching growth. “Union Budget 2026 marks a clear push toward a more connected, AI-powered India.”

Goel pointed to public capital expenditure of ₹12.5 lakh crore, tax exemptions for data centres, and renewed focus on semiconductors as signals of long-term intent.

“Growth hinges on reliable connectivity, efficient data flows, and scalable AI ecosystems. With nearly one billion Indians online and digital industries accelerating, these rival roads and power.”

However, he cautioned that execution will determine outcomes. “India’s growth enters a smarter phase. Direction is set; impact depends on execution.”

Crypto policy remains a pressure point

While the Budget’s technology and manufacturing agenda offers clarity on long-term digital infrastructure, the decision to leave crypto taxation unchanged underscores the government’s cautious approach toward the sector.

A recent report by crypto tax compliance platform KoinX found that over 72 percent of trade volume in India’s bitcoin business moved to offshore exchanges in FY25, rather than disappearing. The shift was driven by tax regulations, which encouraged traders to look for simpler options abroad rather than by hype or crashes.

Meanwhile, prior to the Budget, Tax Survey Report 2026 by CoinSwitch noted rising dissatisfaction among crypto investors with the country’s Virtual Digital Asset (VDA) tax regime. The findings show that investors are not calling for tax removal but are seeking rationalisation and alignment with traditional financial markets. 

The survey, based on responses from nearly 5,000 crypto investors across India, shows strong awareness of existing tax rules. Around 88 percent of respondents say they understand the current framework, which includes a 30 percent tax on gains, a 1 percent tax deducted at source on transactions and no provision for loss set off or carry forward. Of these, 66 percent say they are fully aware of the details.