India Issues 44,000 Crypto Tax Notices, Finds $104M Gap

India’s tax department sent 44,000+ crypto notices after uncovering ₹888 crore in hidden income. Here’s what traders need to know now.

India’s Income Tax Department has sent over 44,000 notices to crypto traders this filing season. Authorities detected more than ₹888 crore, roughly $104 million, in undisclosed Virtual Digital Asset income. 

The crackdown comes as exchanges now report user-level transaction data directly to the government. For Indian crypto investors, the margin for error is shrinking fast.

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India’s Crypto Tax Framework Under the 2025 Income Tax Act

The Income Tax Act, 2025 took effect on April 1, 2026, replacing the 1961 legislation. 

For filings covering FY 2025-26, the old Act still governs investor obligations. The core rules hold: a flat 30% tax on VDA profits, 1% TDS on transfers above ₹10,000, no deductions except cost of acquisition, and no cross-asset loss offsetting. 

The new Act adds “crypto-asset” explicitly to the VDA definition and renumbers governing sections, but the substance of what investors owe has not shifted. What has shifted is how seriously the department is watching.

Investors filing under ITR-2 report crypto as capital gains. Those treating trading as business income use ITR-3. Both forms carry a dedicated Schedule VDA section requiring transaction-by-transaction entries, not aggregated totals. 

Every trade, every swap, every disposal must appear individually. 

A crypto-to-crypto swap is a taxable event in India. Many investors still treat it as portfolio reshuffling, and that is exactly the kind of error the department is now catching.

How Exchange Data Sharing Is Closing the Reporting Gap

Budget 2026 introduced a structural change with real teeth. 

Crypto exchanges, custodians, and wallet providers must now furnish user transaction statements directly to the Income Tax Department. The system cross-references that data against submitted ITRs automatically. 

Any gap between what an investor declares and what the exchange has already reported triggers a flag.

According to the Economic Times report, the department is actively combining Annual Information Statements, exchange TDS filings, and blockchain analytics. The 44,000 notices already issued reflect how quickly that infrastructure is producing results. 

India’s CBDT has also confirmed alignment with the OECD’s Crypto-Asset Reporting Framework, with domestic enforcement targeting April 1, 2027. 

International holdings on overseas platforms will soon be automatically visible to Indian tax authorities through cross-border data sharing.

Common Filing Errors Putting Crypto Investors at Risk

Three errors keep appearing in crypto tax filings, according to compliance professionals cited in the Economic Times. The first is using the wrong ITR form. Filing under ITR-1 when crypto income exists produces a defective return the department rejects outright.

The second is incomplete Schedule VDA reporting. Staking rewards, airdrops, and DeFi income belong under income from other sources, not mixed into trading gains. 

Each category carries separate tax treatment and requires its own disclosure. The third is TDS reconciliation. Every VDA transfer above the threshold leaves a 1% TDS footprint in Form 26AS. Investors who skip that cross-check either miss legitimate refunds or create mismatches that invite scrutiny.

The fix is consistent record-keeping throughout the year. Not data reconstructed under pressure at filing time.

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