India reviews past crypto tax filings as Section 148A notices flag unreported income and data gaps
India’s tax authorities are increasing their review of past cryptocurrency filings after data checks flagged possible mismatches in reported income. Some traders have received notices under Section 148A of the Income Tax Act, a provision that allows officials to seek an explanation before reopening earlier returns.
Much of the current review appears linked to the financial year 2021–22, with exchange activity, bank transfers, and filed tax returns being compared more closely.
India crypto tax notices focus on past filings
Indian authorities are sending Section 148A notices to some crypto traders after automated systems identified possible gaps in earlier tax returns. These notices do not begin reassessment immediately. Instead, they give taxpayers a chance to explain the flagged amount before the tax department decides whether to reopen a case.
Many of the notices relate to FY 2021–22 transactions. Crypto tax platform Koinx said, “Many relate to FY 2021–22 transactions,” while adding, “This number is often NOT your actual profit. It’s just what the system thinks is income … Until you prove otherwise.” The statement shows the flagged amount may reflect a system estimate, not the trader’s real taxable gain.
The review has drawn attention because it reaches back to earlier years instead of focusing only on current filings. Traders are now being asked to match old transactions with the figures disclosed in their tax returns. If the explanation is not accepted, authorities may move to formal reassessment.
Automated checks compare exchange, bank, and tax data
The current review relies on data-matching tools that compare PAN-linked KYC details, exchange records, bank transfers, and filed income tax returns. When those records do not match, the system can flag a case for further examination. The process is bringing more crypto users under scrutiny as tax officials widen their checks.
The issue becomes more complex when traders use several exchanges or transfer assets between platforms and private wallets. In such cases, one part of a transaction chain may be visible while another part may not. A partial view can distort the tax picture and lead the system to treat gross turnover as income rather than net profit.
One example in recent reporting showed that yearly crypto transactions worth about ₹1.6 crore could be flagged as income even if the actual profit, after losses and costs, was only around ₹4 lakh to ₹5 lakh. That gap explains why some traders may face notices even when their real gains were much lower than the amount identified by automated systems.
India keeps strict crypto tax rules as scrutiny expands
India continues to apply one of the strictest tax regimes for digital assets. Income from virtual digital asset transfers is taxed at 30%, while a 1% tax deducted at source applies on eligible transactions above set limits. These rules have already increased transaction visibility, and authorities are now using that trail more actively in enforcement.
The reporting framework is also widening. Global efforts such as the OECD’s Crypto-Asset Reporting Framework are expected to support broader tax information sharing across countries. This may give Indian authorities more visibility into offshore activity linked to digital assets in the coming years.
Koinx urged recipients of notices to stay calm and respond with complete records. The firm said, “If you receive this notice, do NOT panic.” It advised taxpayers to rebuild transaction histories, calculate actual gains or losses, and submit documents that show the full flow of trades and transfers. The current enforcement drive shows crypto tax reviews in India are moving deeper into past filings as data checks become more detailed.
