- India’s Income Tax Department sends notices to crypto traders.
- The government tracks crypto transactions through exchanges, KYC platforms and more.
- Traders must comply with tax regulations, explain their income, and pay taxes.
India’s digital asset industry is gearing up for a significant transformation as the Income Tax Department is tightening its grip on crypto traders. In a move that underscores the government’s increasing scrutiny of digital assets, tax notices under Section 133 (6) are being issued to traders, demanding explanations for their crypto incomes.
With the notices containing detailed information on crypto transactions, including receipts from transfers and winnings from online activities, traders are being asked to explain their income and tax compliance. As the government leverages data from Indian exchanges, KYC platforms, and bank trails, it is clear that crypto activity in India is closely monitored by the authorities.
A Wake-Up Call for Indian Crypto Traders
Indian crypto traders are facing increased scrutiny from the government. The tax authorities have issued notices to thousands of crypto traders, putting an end to the era of informal reporting practices. According to an X post by Zia ul Haque, a prominent influencer in India, the Income Tax Department has started sending reports to individuals, demanding detailed explanations of their virtual digital asset (VDA) income.
These notices, issued under Section 133 (6) of the Income Tax Act, contain transaction-level data, including crypto receipts, transfer values, and online winnings, mapped to taxpayers’ PAN details, Annual Information Statements (AIS), and the assessment year 2024-2025. This indicates that the authorities already possess extensive information on crypto transactions and are now seeking justification and reconciliation of income. This move also highlights that tax compliance is no longer optional for crypto traders in India. The influencer noted, “The message is clear: crypto trading in India is being closely monitored, and tax compliance is being strictly enforced.”
In India, cryptocurrencies are considered virtual digital assets (VDAs). As per Indian crypto regulation, crypto traders are poised to pay a tax of 30% for capital gains. In addition, the framework imposes a 1% Tax Deducted at Source (TDS) under Section 194S on sale proceeds exceeding ₹50,000 in a financial year. This tax framework applies uniformly to all investors, whether private or commercial, who transfer digital assets during the year, with a uniform tax rate applicable to both short-term and long-term gains.
Crypto Transactions Are Fully Transparent in India
The government’s ability to track crypto traders’ activities in the country has improved significantly. The data is now sourced from Indian crypto exchanges, KYC-compliant platforms, TDS deductions, and bank transaction trails. This development underscores that digital asset transactions are no longer invisible and are subject to taxation.
Significantly, this development signals a paradigm shift for the Indian crypto industry, as the government’s enhanced tracking capabilities and tax enforcement efforts are likely to increase transparency and accountability. With crypto transactions now firmly in the tax net, industry players can expect stricter compliance requirements, potential regulatory clarity, and a more level playing field.
However, this increased scrutiny may also lead to higher operational costs, potential tax liabilities, and a possible impact on trading volumes and investor sentiment. Ultimately, the industry may see a shift towards more compliant and regulated players, potentially paving the way for mainstream adoption and institutional investment in the long run.
