The 2026 income tax return filing season has exposed a significant compliance gap among cryptocurrency investors in India. According to internal data shared by KoinX founder Punit Agarwal, only 21.83% of users who had TDS deducted on their crypto transactions went on to file their crypto taxes. This indicates that a large majority stopped after the TDS deduction, assuming their tax obligations had ended. As reported by Mint, this misunderstanding creates two major problems: some investors end up under-reporting their crypto income and may still have additional tax liability, while others may be eligible for TDS refunds but fail to claim them because they never file an income tax return.
Investors who missed the original ITR deadline can still file a belated return under Section 139(4), although doing so may attract applicable interest and a late filing fee. According to Agarwal's guidance, the ITR-2 filing deadline ended on 31 July, with investors now able to file a belated return until 31 December 2026. For ITR-3 filers engaged in crypto futures and derivatives trading, the applicable deadline is 31 August for non-audit cases, while tax audit cases can file until 31 October. As reported by Mint, the choice of ITR form depends on the nature of the investor's crypto activity, with ITR-2 generally applicable for individual investors reporting crypto-related capital gains and ITR-3 for frequent or substantial crypto trading treated as business income.
Crypto income must be reported under Schedule VDA, which is separate from other income schedules in the ITR. According to Agarwal's recommendations, investors should ensure that every type of crypto transaction is disclosed, not restricting reporting to only buying and selling of cryptocurrencies. As reported by Mint, transactions that should be reported include crypto buy and sell transactions, staking rewards, airdrops, and crypto received as payment for goods or services. Proper reporting in Schedule VDA helps ensure accurate tax computation and reduces the risk of future compliance issues.
A common misconception is that investors who file a belated return are no longer eligible to claim a refund of the TDS deducted on crypto transactions. According to Agarwal's clarification, this is incorrect. As reported by Mint, taxpayers can still claim eligible TDS refunds even while filing a belated return, provided the return is filed correctly and Schedule VDA is duly completed. TDS should be viewed as a checkpoint in the tax process rather than its conclusion, with filing an ITR remaining mandatory wherever applicable.
