Crypto Tax Notice: The Income Tax Department has sent notices to thousands of crypto investors who did not report their income properly in ITR. Know from the experts how tax is levied on crypto and how to show it correctly in ITR.
Crypto Tax Notice: The Income Tax Department has sent notices to thousands of taxpayers for assessment years 2023–24 and 2024–25 who did not report their crypto income correctly in the Income Tax Return (ITR). According to a PTI report, the move has been taken under the Income Tax Department’s NUDGE (Non-intrusive Usage of Data to Guide and Enable) initiative. Its purpose is to motivate taxpayers for voluntary compliance, without pressure.
Why have these notices been sent?
According to reports, a large number of taxpayers did not fill ‘Schedule VDA’ in ITR or wrongly showed the earnings from crypto as capital gain, business income or gift. In some cases, there is also suspicion of buying crypto with unaccounted funds, which may come under the purview of tax evasion or money laundering.
According to Edul Patel, Co-founder and CEO of Mudrex, “Just like you report your earnings in the stock market, you should show crypto gains with the same seriousness.” The Income Tax Department has clarified that crypto income, whether from trading, mining, airdrop, staking or salary received in crypto, is required to be disclosed in the return.
What does the law say?
Section 115BBH added to the Income Tax Act under the Finance Act 2022 states that a flat 30% tax will have to be paid on earnings from crypto, irrespective of the holding period. No deduction is allowed in this, except for the cost of acquisition. Talking about TDS, 1% TDS (Section 194S) is also applicable on every crypto transaction.
CoinDCX co-founder Sumit Gupta says, “Strictness is necessary regarding TDS. If the exchange does not deduct TDS or the investor does not deposit TDS, then it can lead to penalty or even jail.”
How to report crypto income correctly in ITR?
If you have earned any money from crypto, then show it correctly in ITR. For this, follow the steps given below:
Choose the right ITR form: If you have kept crypto as an investment, then use ITR-2 form. But if trading is a part of your regular business, then ITR-3 has to be filled.
Show all sources of income: Like trading, mining, airdrops, staking or crypto payments. Some people show only purchases and sales, but the rest of the income is also taxable.
Verify TDS: Check in Form 26AS whether the TDS deducted by the exchange is properly visible or not. Incorrect TDS reporting can hinder the process.
From which platforms to trade?
Income tax officials say that the highest mismatch has been found in those users who use foreign or unregulated platforms. These neither deduct TDS nor give clean transaction history.
Sumit Gupta of CoinDCX says, “If you use a regulated exchange of India, then TDS is deducted automatically and the complete tax report is easily available, which makes filing easier.”
What’s next on crypto income?
From the financial year 2025–26, all taxpayers will have to give complete information in a separate section ‘Schedule VDA’ for crypto income. Through this, taxpayers will have ease of compliance and the government will get better data of income related to VDA. Also, this will make it easier for the crypto trader to show income in ITR.
‘Schedule VDA’ in ITR is actually a separate section created in the Income Tax Return (ITR) form for reporting income from Virtual Digital Assets (VDA). In this, you have to report in detail the income earned from your digital assets like crypto or NFT. Such as what did you sell, for how much, what was the purchase price, how much tax is due, etc.
