Income Tax Department Targets Unreported Crypto Gains: Thousands of Notices Sent

Income Tax Department Cracks Down on Unreported Crypto Earnings

The Income Tax Department of India has begun a major crackdown on taxpayers who have failed to report income from cryptocurrency transactions in their tax filings. This move comes after an analysis of data from cryptocurrency exchanges revealed discrepancies between reported incomes and actual transactions. Many individuals have underreported or entirely omitted their crypto earnings from their tax returns.

The crackdown is based on Section 115BBH of the Income Tax Act, which was introduced in April 2022. This section mandates a 30% tax on gains from the transfer of Virtual Digital Assets (VDAs), such as cryptocurrencies. The law also specifies that no deductions are allowed, except for the cost of acquiring these assets. Additionally, a 1% Tax Deducted at Source (TDS) is applied on crypto transactions exceeding ₹50,000 in a financial year. Despite these provisions, a significant number of taxpayers have not accurately disclosed their crypto earnings.

The Income Tax Department has already sent emails to thousands of taxpayers, urging them to revise their Income Tax Returns (ITRs) for the assessment years 2023–24 and 2024–25. This communication is part of a “nudge” campaign to encourage voluntary compliance. The notices give taxpayers the opportunity to correct their filings without facing immediate penalties. However, those who ignore the warning and fail to report their crypto earnings may face further scrutiny, financial penalties, or even legal action.

The tax authorities’ move to target cryptocurrency-related income comes at a time when the Indian government is working to regulate the booming digital asset market. The government’s push for better regulation and reporting of crypto transactions aims to prevent tax evasion and to ensure that cryptocurrency traders are paying their fair share of taxes.