India’s crypto tax enforcement has entered a much harsher phase. The Central Board of Direct Taxes, or CBDT, has sent more than 44,000 notices to digital asset traders and identified ₹888 crore in undisclosed cryptocurrency income, equal to about $104 million.
1% TDS became a tracking system for trader activity
Many traders had assumed their digital asset activity was difficult for authorities to trace. That assumption is proving expensive. In India, each qualifying transaction on a domestic exchange triggers 1% Tax Deducted at Source. The tax collection mechanism also creates a detailed transaction trail.
CBDT compared that TDS data with individual income tax returns and detected reporting gaps. The report says the Income Tax Department now automatically cross-checks Schedule VDA disclosures against exchange records, making undeclared or underreported activity much easier to spot.
VDA rules require separate reporting for each disposal
Under the rules described in the source, gains from Virtual Digital Assets are taxed at 30%, with no deductions allowed. Every crypto transfer or sale also faces 1% TDS. Losses from one cryptocurrency trade cannot be used to offset gains from another.
Reporting obligations are also strict. Taxpayers must disclose each disposal of digital assets separately in Schedule VDA, including transaction-level details and the platforms used. If a filing does not match platform records, it can trigger a notice.
Exchanges and wallet providers now send user-level data directly
The article says India’s 2026 budget changed the compliance framework for crypto platforms operating in the country. Exchanges, wallet providers, and custodians are now required to submit user-level transaction data directly to the authorities. This requirement is mandatory.
That gives the government a verifiable record of each buy, sell, and transfer executed on supported platforms. The ₹888 crore in hidden income identified by CBDT represents only the amount confirmed so far, and enforcement is still widening.
Penalties can escalate beyond tax recovery
The report also points to sharp consequences for evasion. In addition to tax recovery, offenders may face penalties of 70% of the tax amount. In more serious cases, money laundering laws may apply; the article says 29 arrests have already been recorded.
For traders with incomplete or inaccurate filings, the immediate task is practical: gather transaction histories from each exchange used during the financial year, match TDS certificates against actual trading records, and submit corrected returns where discrepancies exist. The combination of exchange reporting and automated checks has made crypto tax records in India far less opaque.