India's Income Tax Department has issued over 44,000 VDA (Virtual Digital Asset) notices as part of stricter crypto tax compliance checks. According to reports from The Economic Times, these notices were issued after matching crypto filings with exchange-reported transaction data. The enforcement action demonstrates how tax officials are using exchange data, TDS filings, and investor returns to track mismatches in crypto tax reporting. The scale of this operation signals that data-matching, not random audits, is now driving enforcement in India's crypto sector.
The department's compliance checks revealed more than ₹888 crore ($104 million) in undisclosed VDA income, as reported by The Economic Times. This substantial amount highlights the scale of hidden crypto income that tax authorities are now identifying through enhanced monitoring systems. The $104 million figure refers to income the department says went undeclared, not the tax owed on it, with recovery, penalties, and interest sitting on top of that base once cases are assessed. The figures show how tax officials are using exchange data, TDS filings, and investor returns to track mismatches between reported and actual crypto transactions.
India's core crypto tax rules remain unchanged for FY 2025-26, with gains from virtual digital assets taxed at a flat 30% rate, while eligible transfers face a 1% tax deducted at source (TDS). According to The Economic Times, VDA income is taxed without deductions, except the cost of acquisition, and losses from one crypto asset cannot be used to reduce gains from another asset. The 1% TDS applies to the transaction itself, separate from the income tax on any profit, creating additional compliance burdens for crypto holders. Investors must use ITR-2 when reporting crypto as capital gains, while those treating crypto trading as business income must use ITR-3.
Schedule VDA has become a key filing test, requiring investors to report each trade, swap, disposal, and taxable transfer separately rather than just net gains. As reported by The Economic Times, crypto-to-crypto swaps can also create taxable events. Budget 2026 added tighter reporting duties for exchanges, custodians, and wallet providers, requiring these entities to send user-level transaction data to the Income Tax Department. This allows the department to compare investor filings with exchange records and identify mismatches. Since 2022, Indian platforms have been required to deduct 1% TDS on VDA transfers and report those deductions, creating a paper trail the department can now reconcile against individual returns.
The compliance net may widen further from 2027 as India aligns with the OECD Crypto-Asset Reporting Framework, which supports cross-border sharing of crypto account data. According to The Economic Times, this framework will make overseas crypto holdings easier for authorities to trace. The latest notices show that crypto tax filing in India has moved beyond self-reporting alone, with investors who used multiple exchanges, DeFi platforms, or offshore accounts now facing a higher burden to keep full records. Missing staking income, airdrops, wallet transfers, or TDS reconciliation can create questions during review. A notice is a request to reconcile, not an automatic penalty, with the practical response being to assemble a complete transaction history including every buy, sell, swap, and card-triggered disposal with dates and rupee values at the time of each event.
