ChainCatcher reported that Indian crypto asset investors will face stricter filing and compliance requirements in the 2026 tax season as tax enforcement intensifies. Incorrect reporting can trigger penalties and scrutiny. For taxpayers who hold, trade or transfer virtual digital assets across different platforms, the focus of compliance is shifting from simply reporting annual gains to maintaining a complete record of each individual transaction.
30% Tax Rate, 1% TDS and Loss-Offset Restrictions Remain in Place
Under the current rules, gains from crypto assets remain subject to a flat 30% capital gains tax. Transactions above a certain amount are also subject to a 1% tax deducted at source, known as TDS. At the same time, losses from crypto assets cannot be offset across different assets, meaning a loss on one asset cannot be used to reduce gains generated by another. The new Income Tax Act (2025) took effect on April 1, 2026, but the report said the core tax framework has largely remained unchanged.
On the filing side, investors must use the dedicated Schedule VDA section in the ITR-2 or ITR-3 forms. This section requires transaction-by-transaction reporting, covering trades, swaps, transfers, settlements and all other relevant operations. It is not enough to provide only an aggregate profit figure. For active traders, the transaction history, tax deduction records and asset movement trail all need to match the information submitted in the tax return.
Authorities Use Exchange, Custody and Wallet Data for Automated Cross-Checks
The report emphasized that India’s enforcement focus has been upgraded. Tax authorities will obtain user-level transaction data directly from trading platforms, custodians and wallet service providers, then automatically compare that data with investors’ declared information. If the records do not match, the system will flag the case and trigger a review process. Data cited in the report shows that Indian tax authorities have already issued more than 44,000 notices and identified around 88.8 billion rupees, or approximately $930 million, in undeclared virtual asset income.
The tax department is also combining on-chain analytics tools with international data-sharing mechanisms to strengthen its tracking capabilities. According to the report, beginning in 2027, India will connect with the OECD Crypto-Asset Reporting Framework, enabling automatic exchange of cross-border transaction data. Holdings on overseas exchanges will also gradually enter the regulatory field of view.
Common filing errors include using the wrong tax form, omitting airdrop and staking income, and failing to correctly match 1% TDS records. The report stated that crypto tax compliance is moving from “post-event supplementary reporting” toward a “real-time traceable” model. Investors therefore need to strengthen record management throughout the full year, rather than waiting until the filing period to reconstruct activity from incomplete records.