Undisclosed crypto income: Respond to taxman's notice, file revised return

Underreporting or misreporting crypto income can lead to penalties ranging from 50 to 200%, even imprisonment of up to seven years

The Income-Tax (I-T) Department has detected widespread tax evasion involving cryptocurrencies and, according to media reports, has issued emails to thousands of defaulting taxpayers seeking transaction details. Investors must understand the tax rules governing crypto assets and respond promptly to these emails.

 

How evasion is detected

 

The department gathers data on cryptocurrency activity from several sources. “Reporting agencies such as cryptocurrency exch­anges and banks are obligated to report transactions through the Statement of Financial Transactions (SFT) to the tax department. Since July 1, 2022, TDS deduction is applicable on crypto tran­sfers, which serves as a direct repo­rting to the I-T