- Authorities issued 44,000+ notices and identified $104M in undisclosed crypto income.
- The action was taken over undeclared income from assessment years 2023-24 and 2024-25.
- Authorities are cross-checking tax returns with exchange and wallet provider data.
India’s Income Tax Department has contacted thousands of crypto investors after identifying discrepancies between trading activity and reported income. According to reports, authorities have already issued more than 44,000 VDA-related notices and uncovered over ₹888 crore ($104 million) in undisclosed crypto income.
Officials suspect some high-risk users may have used undeclared money to buy virtual digital assets. As part of its NUDGE campaign, the department has sent emails asking taxpayers to file updated returns if crypto gains were omitted or reported incorrectly.
The initiative follows the department’s approach of pushing voluntary compliance before moving toward deeper investigations.
Schedule VDA Under Fresh Scrutiny
Tax officers have been using data analytics to identify investors who failed to properly fill out Schedule VDA, the section dedicated to crypto assets. Authorities found that some taxpayers either paid tax at lower rates or tried to claim benefits not allowed under crypto rules.
Under Section 115BBH, income from crypto transfers is taxed at a flat 30%, along with applicable surcharge and cess. Investors can only deduct the purchase cost. Losses cannot be offset against salary, capital gains, or any other income, nor can they be carried forward to future years.
Authorities are matching income tax returns with TDS records submitted by exchanges and other virtual asset service providers. Cases with mismatches could face verification or detailed scrutiny.
More Reporting Data Is Flowing to the Department
Enforcement has become tougher even though the basic tax rules remain unchanged. The Income Tax Act, 2025, came into force on April 1, 2026, replacing the 1961 law. For FY 2025-26 filings, investors still face a 30% tax on profits and a 1% tax deducted at source on eligible transfers above ₹10,000.
The new law formally includes “crypto-assets” within the VDA definition, but the bigger change is in reporting. Exchanges, custodians, and wallet providers are now required to submit user-level transaction information directly to tax authorities.
This data is automatically compared with investor filings. Every trade, token swap, and disposal listed in Schedule VDA must match the records already available with the department.
Tax professionals say crypto-to-crypto swaps, staking rewards, airdrops, and DeFi income are among the most common areas where investors make mistakes.
Authorities Expand Crypto Transaction Monitoring
Officials are relying on Annual Information Statements, exchange TDS data, and blockchain analytics to track transactions. The gap between what investors disclose and what authorities can independently verify is shrinking rapidly.
Investors using overseas exchanges could face even closer monitoring in the coming years. India has aligned itself with the OECD’s Crypto-Asset Reporting Framework, with implementation targeted from April 2027.
Once active, cross-border information sharing will give tax authorities access to holdings on foreign platforms as well.
Related: Why the Indian Rupee Is Falling and What It Means for Bitcoin
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