Got an income tax notice for crypto? What to do
Got an email, SMS or notice from the Income Tax Department about crypto? Why it happens, how to check it, and how to respond or correct your ITR.
- Checked against the rules: Jun 2026
- Sources cited · No buy or sell calls
- Tax year 2026–27
As exchanges report more crypto data to the tax department, more Indians are getting emails, SMS messages and formal notices about crypto. Most can be resolved quickly if you act on time.
Why you might get one
Indian exchanges deduct 1% TDS and report your transactions, and these reports flow into your Annual Information Statement (AIS). You may be contacted if:
- your AIS shows crypto sales, but your ITR has no Schedule VDA entries,
- you filed ITR-1, which has no crypto section, despite crypto transfers,
- the amounts you reported don't match what exchanges reported, or
- you claimed TDS that doesn't match the deductor's records.
From April 2026, platforms also face penalties for missing or incorrect crypto reports, so the data is getting more complete. See what the 2026 penalties mean.
Types of communication
- Compliance emails or SMS asking you to review high-value or mismatched transactions. These usually ask for a response on the compliance portal, not an immediate payment.
- Intimation after processing your return, which may adjust the tax or refund.
- Formal notices asking for details or explanations, or proposing reassessment of an earlier year.
Step 1: verify it's genuine
Scammers send fake "tax notices" with payment links. Don't click links in messages. Log in directly at the official e-filing portal and check Pending Actions and the Compliance Portal. Every genuine notice will be there, with a document identification number.
Step 2: understand what's being asked
Read the notice carefully. Note the year, the transactions mentioned and the deadline. Download your AIS and compare it with your exchange tax reports and your filed return.
Step 3: respond
- If the data is wrong, for example a duplicate entry, give feedback on the AIS and explain in your response, with exchange statements as evidence.
- If you made an error, such as using the wrong form or missing trades, correct it. If the deadline for a revised return has passed, an updated return (ITR-U) lets you report missed income for earlier years. You pay the tax plus additional tax that rises the longer you wait.
- If it's a scrutiny notice, expect to provide a full profit-and-loss statement for your trades, exchange reports, wallet histories and bank statements explaining credits and debits, including for loss-making trades, since TDS deducted on them appears in your AIS.
- If the notice is complex or covers large amounts, get help from a chartered accountant before responding.
Under-reported income can attract a penalty of 50% of the tax involved, rising to 200% where it's treated as misreporting, such as deliberately hiding income. That's on top of the tax and interest. Offshore activity isn't safe from this: tax authorities share information internationally.
Step 4: fix your process for next year
- File ITR-2 or ITR-3 with a complete Schedule VDA. Use the ITR form chooser and the Schedule VDA guide.
- Reconcile with your AIS before filing.
- Report offshore activity too. See foreign exchanges and Schedule FA.
Frequently asked questions
I ignored a crypto compliance email. What happens?
Unanswered compliance requests can lead to formal notices and, eventually, reassessment with interest and penalties. Respond as soon as you can, even if late.
Can I be penalised for unreported crypto gains?
Yes. Under-reporting income can attract penalties and interest, on top of the 30% tax. Correcting it yourself before the department acts usually costs less.
Do I need a CA to respond?
Not for simple mismatches. For reassessment notices or large amounts, professional help is wise.
Why did I get an income tax notice for crypto?
Usually because your AIS shows crypto TDS or transactions that don't match your return. Respond on the e-filing portal by the deadline.
Should I ignore a crypto tax notice?
No. Missing the deadline can lead to an assessment without your side being heard. Reply, or file an updated return if you missed income.
Sources
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