IT Department Reportedly Issues Tax Notices to Crypto Traders Over Past Unreported Transactions

Income Tax Department of India has reportedly begun issuing tax notices to crypto investors who failed to report their crypto transactions from the past financial years. This move is said to be an attempt to improve control over Virtual Digital Assets (VDAs) of the country. According to a new report, the decision comes after an increased investigation using transaction data to find discrepancies between reported income and exchange data. These notices will allow investors to disclose unreported income before any kind of formal proceedings. Government officials are looking to increase regulatory authority on crypto assets with such decisions. 

Enforcement Push Targets Mismatches in Crypto Transaction Reporting

A thread shared by crypto tax platform KoinX highlights how these notices are being triggered and why many investors may be caught off guard. The company says that tax authorities are using tools like the Insight Portal and CRIU risk engine to look for mismatches in exchange data, PAN-linked KYC, bank transfers, and income tax filings.

In several cases, the system flags total trading volume as “deemed income” instead of actual profits, which can significantly inflate the reported figure. The thread also says that these notices are not final tax demands but show-cause notices, which give investors a chance to explain any differences with the right paperwork and transaction records.

This initiative reflects tightening crypto tax enforcement, with regulators working to improve transparency and ensure investors adhere to existing reporting requirements. Failure to disclose crypto income will result in investors facing penalties or facing further government scrutiny under the current crypto tax framework. These notices come under section 148A and are meant to find any kind of deviations between the income reported and the actual exchange data. 

The development also aligns with broader regulatory efforts in India to tighten oversight of crypto assets. In the Union Budget 2026, the government proposed penalties for failing to report or inaccurately reporting crypto-related transactions. The proposed rule brings greater accountability for digital assets and aligns them more closely with the country's financial standards. 

The latest notice highlights the growing emphasis on the accountability of crypto assets in the country. As enforcement becomes more data-driven and comprehensive, investors are likely to face increased scrutiny for past and future transactions. The development underscores the importance of accurate reporting and compliance, as authorities continue to tighten oversight of digital asset activity in the country.