Crypto Traders Face Tax Notices as India Tightens VDA Checks

Why Crypto Trades Are No Longer Hidden From Tax Records

Crypto traders are facing stronger tax checks as authorities increase monitoring of digital asset activity. The Income Tax Department has begun issuing Section 133(6) notices to individuals involved in crypto transactions for Assessment Year (AY) 2024–25. These notices focus on Virtual Digital Assets (VDAs) and highlight income that may not have been fully reported.

This step signals a clear change in approach. Crypto activity is no longer treated as a grey area. Instead, it is being reviewed with the same seriousness as other financial income.

Source: X Account

What the Section 133(6) Notices Show

Section 133(6) allows authorities to ask for details when they already have related data. In this case, the notices are detailed and specific. They already include:

• Receipts and transaction values
• Online trading gains
• Data mapped to PAN, AIS, and AY 2024–25

In short, these notices are not asking users whether they traded crypto. They are asking users to explain transactions that are already visible in official records.

How Trades Are Being Tracked

The tracking of activity is happening through multiple connected systems. These include:

• KYC-compliant exchanges, which report user data
• 1% TDS deductions 
• Bank transaction records
• Annual Information Statement (AIS) and Tax Information Statement (TIS)

When these sources are combined, they create a clear trail of trading activity. Even small or infrequent trades can now be identified.

Link to the 2022 Tax Framework

This enforcement is based on the rules introduced in 2022. Under this system:

• Gains are taxed at a flat 30% rate
• Losses cannot be adjusted against other income
• A 1% TDS applies on each transaction

Recent reports suggest that this structure has led to a strong rise in collections. Crypto-related revenue reportedly grew by over 40% in 2025, reaching around $61 million. Authorities see this as a sign that closer tracking improves compliance.

Why This Matters for Everyday Traders

For regular users, this news is important because it changes how activity should be viewed. Many traders once believed that small trades or old activity would go unnoticed. That assumption no longer holds.

Key takeaways include

• Past transactions may still be reviewed
• AIS data can reflect trades automatically
• Missing or incorrect reporting may lead to follow-up questions

Keeping clear records is now essential, not optional.

Mixed Views From the Community

User reactions to this move are divided. Some traders welcome the change. They believe stronger rules and enforcement can bring long-term trust and help gain wider acceptance.

Others feel the tax structure remains too harsh. High rates and no loss set-offs can make trading difficult for small users. For them, the concern is that strict rules may slow growth and reduce participation.

This split reflects a wider debate about how to balance innovation with financial oversight.

Is This a Step Toward a Mature System?

Many experts say it is. Active monitoring shows that it is now part of the formal financial system. Instead of unclear rules, users now have defined expectations around reporting and compliance.

Globally, many regions are moving in a similar direction. Regulators are shifting from warnings to structured enforcement. While this can feel strict, it also reduces uncertainty for users and businesses.

What Traders Should Do Now

To stay prepared, traders should take simple and timely steps:

• Review past transactions on all platforms
• Match exchange data with AIS records
• Keep proofs of deposits, and withdrawals
• Seek professional advice if records do not match

Early action can help avoid stress and confusion later.

Bigger Picture for the Market

This development marks a new phase for crypto trading. Compliance is now being enforced, not suggested. While debates around fairness will continue, the direction is clear.

It is no longer under the radar. Transparency and reporting are becoming the base of the ecosystem.

Disclaimer
This article is for informational purposes only. It does not provide investment advice. Readers should consult qualified professionals for guidance related to taxation and reporting.