The Government has proposed a new penalty framework for failure to furnish statements or for furnishing inaccurate information relating to crypto transactions.
The proposal seeks to enforce reporting obligations under the Income-tax law and introduce deterrence against non-compliance in the rapidly evolving digital asset ecosystem.
Reporting Obligation Under Section 509
Section 509 of the Income-tax Act places an obligation on prescribed reporting entities to furnish a statement containing details of transactions in crypto-assets. These statements are intended to enable tax authorities to track crypto transactions and ensure proper tax compliance.
With the growing adoption of crypto-assets, accurate and timely reporting has become a key focus area for tax administration.
Why a Penalty Provision Is Being Introduced
To ensure effective implementation of section 509 and discourage non-compliance, it has been proposed to introduce specific penalty provisions for:
- Failure to furnish the prescribed statement, and
- Furnishing inaccurate particulars in the statement and failing to rectify such inaccuracies
The absence of a dedicated penalty provision so far was seen as a compliance gap, which this amendment seeks to address.
Proposed Penalties: Key Highlights
Under the proposed amendment:
- Penalty of Rs 200 per day will be levied for non-furnishing of the statement on crypto-asset transactions
- Penalty of Rs 50,000 will be imposed for furnishing inaccurate particulars in the statement and failing to correct such inaccuracies
These penalties are designed to act as a deterrent and promote accurate reporting by entities involved in crypto transactions.
Amendment to Section 446
To give effect to the above penalties, it is proposed to amend section 446 of the Act , which deals with penalty provisions. The amendment will explicitly cover defaults relating to crypto-asset transaction reporting under section 509.
This legislative change provides clarity and legal backing to penal action for non-compliance in this area.
Effective Date of the Amendment
The proposed penalty provisions will come into force from 1 April 2026 . Accordingly, reporting entities will need to ensure that systems and processes are in place well in advance to comply with the enhanced reporting and accuracy requirements.
Key Takeaway
The introduction of penalties for non-furnishing or incorrect reporting of crypto-asset transaction statements marks a clear signal of the Government’s intent to tighten oversight of crypto transactions . Reporting entities must focus on timely submission and accuracy of disclosures to avoid financial exposure once the amendment becomes effective from April 2026.
Official copy of the Clause is as follows
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