The Central Board of Direct Taxes (CBDT) and Income Tax Department have started issuing crypto income tax notices to thousands of Indian investors who haven’t reported their cryptocurrency gains in their Income Tax Returns for the assessment years 2022–23 and 2023–24. These notices aim to ensure compliance under the “NUDGE” policy, encouraging voluntary correction before stricter enforcement.
💡 Why Are Notices Being Issued?
- Data Matching with Crypto Exchanges:
Tax authorities are cross-checking TDS and transaction data from cryptocurrency exchanges against declared income - Strict 30% Flat Tax on Gains:
All profits from crypto trades are taxed at 30% under Section 115BBH, with no deductions allowed—and a mandatory 1% TDS on large transactions - Efficient Data Analysis:
AI-powered tools now flag “high-risk” investors who show significant crypto activity with no matching tax disclosures timesofindia
📆 Timeline & Policy Context
- Since April 1, 2022, crypto is treated as a Virtual Digital Asset (VDA), subject to a 30% flat tax plus cess and 1% TDS .
- The recent surge in notices is part of the third NUDGE phase, following past campaigns on foreign assets and bogus deductions
✅ What Should You Do If You Receive a Notice?
- Don’t Ignore It: These are not just reminders—non-response could lead to scrutiny and penalties.
- Review Filed ITRs: Check your ITR for FY 2022–23 and 2023–24, and ensure all crypto-related income is reported correctly—especially Schedule VDA.
- Amend Returns Using ITR‑U: Under Section 139(8A), you can file revised returns to correct or add missed crypto income
- Keep Detailed Records: Maintain thorough records of every transaction—dates, prices, and volumes—to support your declarations
- Confirm TDS Credits: Ensure 1% TDS deducted by exchanges appears correctly in your Form 26AS/AIS
- Seek Accounting Help: Consult a tax professional specialized in crypto filings if needed.
- Plan Ahead: Staying compliant now may reduce penalties and build credibility for future filings.
⚠️ Consequences of Non‑Compliance
- Penalties: Fines, interest, or legal action under tax laws.
- Potential Scrutiny: Your crypto activities could be subject to deeper audit or investigation
- Missed Deadlines: The NUDGE initiative provides limited time for voluntary amendments—don’t miss the window.
🌐 Broader Crypto Regulatory Climate
India’s strict crypto tax regime has led many traders to offshore exchanges, with the government now prioritizing better compliance and documentation. Enforcement actions also follow global crypto AML standards to curb illicit finance
🧭 Final Takeaway
If you’ve traded or invested in crypto in recent years—even small amounts—you may receive a crypto income tax notice soon. Don’t delay: review your filings, update missing income, and stay compliant with India’s powerful VDA tax regime. This is your chance to avoid penalties and future scrutiny.
