Income Tax Department Cracks Down on Undisclosed Crypto Trading
India’s crypto traders are facing increased scrutiny after a major disclosure in Parliament. During a recent Lok Sabha Q&A session, the government revealed that the Income Tax Department has issued notices to nearly 44,000 individuals involved in cryptocurrency trading who failed to disclose their crypto transactions in their Income Tax Returns (ITR).
This development highlights how seriously Indian authorities are now monitoring crypto-related financial activity, especially on Indian crypto exchanges where Tax Deducted at Source (TDS) is already being collected.
Who Received These Notices?
According to the information shared in Parliament, these notices were sent primarily to individuals who:
- Traded cryptocurrencies on Indian exchanges
- Had 1% TDS deducted on their transactions
- Did not report crypto trading details in their ITR
- Ignored reporting even when trades resulted in losses
The Income Tax Department clearly stated that whether you make a profit or incur a loss, crypto transactions must be disclosed in your tax filings.
₹4,500 Crore Worth of Crypto Frozen by ED
Along with tax notices, another significant revelation shocked the crypto community. The Enforcement Directorate (ED) has frozen crypto assets worth nearly ₹4,500 crore.
This is not linked to a single individual or case. Instead, it involves multiple wallets and accounts, indicating a broader investigation into:
- Suspicious crypto transactions
- Non-compliance with Indian financial laws
- Possible money laundering or tax evasion cases
This shows that crypto regulation in India is no longer theoretical—it is being actively enforced.
Undisclosed Crypto Income Estimated at ₹890 Crore
The government also shared an estimated figure of ₹890 crore as undisclosed income, based on data analysis of crypto transactions that were never reported in income tax filings.
This estimation further explains why authorities are tightening surveillance and issuing bulk notices to traders who assumed crypto activity would go unnoticed.
TDS Is Not Enough, Reporting Is Mandatory
One of the most common misunderstandings among crypto traders is the belief that TDS deduction equals tax compliance. This is incorrect.
Key points every crypto trader must understand:
- 1% TDS is only a transaction-level deduction
- It does not replace income disclosure
- Crypto income must be reported under Virtual Digital Assets (VDA)
- Even losses must be declared in the ITR
Failing to do so can trigger notices, penalties, and further scrutiny.
How Can Traders Stay Compliant?
If you trade crypto on Indian exchanges, compliance is straightforward but essential.
Most exchanges provide:
- Transaction history reports
- Annual crypto tax summaries
- Downloadable statements compatible with tax filing
Platforms like CoinDCX, WazirX, and others allow users to export reports that can be submitted while filing ITR.
Being transparent today can help avoid unnecessary legal and financial stress later.
Why This Update Matters
This is a clear signal that:
- Crypto is no longer a regulatory grey area in India
- Authorities have access to exchange-level data
- Non-disclosure can lead to legal consequences
For retail investors and traders, this update serves as a strong reminder that crypto profits are not invisible to the tax system anymore.
Final Thoughts
If you are trading cryptocurrencies through Indian exchanges and your TDS is being deducted, you are already on the radar. Ignoring crypto reporting in ITR—whether intentional or not—can lead to notices, penalties, and deeper investigations.
Transparency and timely compliance are now the safest approach for crypto investors in India.
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