ChainCatcher report: As India intensifies its tax enforcement, crypto asset investors will face stricter reporting and compliance requirements for the 2026 tax season, with inaccurate filings potentially triggering penalties and audits. According to current rules, gains from crypto assets remain subject to a flat 30% capital gains tax, and a 1% tax deducted at source (TDS) applies to transactions exceeding a specified threshold, with no loss offsetting allowed across different assets. The new Income Tax Act (2025) took effect on April 1, 2026, but the core tax framework remains largely unchanged. At the reporting level, investors must complete the dedicated Schedule VDA section on ITR-2 or ITR-3 forms and maintain detailed, transaction-by-transaction records of all activities—including trades, swaps, transfers, and settlements—not merely aggregated gains. The report emphasizes that regulatory oversight has significantly escalated: Indian tax authorities will directly obtain user-level transaction data from exchanges, custodians, and wallet providers and automatically cross-check it against submitted filings; discrepancies will trigger system flags and audits. Data shows that Indian tax authorities have issued over 44,000 notices and identified approximately INR 88.8 billion (around USD 930 million) in unreported virtual asset income. Additionally, tax agencies are enhancing tracking capabilities by integrating on-chain analytics tools with international data-sharing mechanisms. Furthermore, starting in 2027, India will align with the OECD Crypto-Asset Reporting Framework to enable automatic exchange of cross-border transaction data, gradually bringing overseas exchange holdings under regulatory scrutiny. Common errors include using incorrect filing forms, omitting airdrop and staking income, and failing to properly reconcile 1% TDS records. The report stresses that crypto tax compliance is shifting from “retrospective reporting” to “real-time traceability,” and investors must strengthen year-round recordkeeping practices.
India Discovers $930 Million in Unreported Crypto Income, Intensifies Tax Scrutiny for 2026 Filing Season
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Summary
India has identified $930 million in unreported cryptocurrency compliance income, signaling a major push for crypto transparency ahead of the 2026 tax season. The new Income Tax Act (2025), effective April 1, 2026, requires detailed reporting of all cryptocurrency activities via Schedule VDA in ITR-2 or ITR-3. Tax authorities are now directly accessing user data from exchanges and wallet providers for automated verification. Over 44,000 notices have been issued, with plans to align with the OECD’s cryptocurrency compliance framework by 2027 for cross-border reporting.
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