India Is Sending Crypto Tax Notices for 2021 Trades—Even Small Investors Are Being Flagged

Key Takeaways

The Indian Income Tax Department is sending Section 148A notices to people who traded crypto in FY 2021-22.
These notices come because the government has data from banks and exchanges showing your trading activity.
Many traders are getting notices even if they made little profit, as the department looks at total buying and selling amounts.

India’s Income Tax Department is turning up the heat on crypto traders, issuing fresh tax notices tied to transactions from the 2021–22 financial year.

The notices, sent under Section 148A of the Income Tax Act, are already stirring concern across the country’s crypto community.

Traders Face Tax Notice For Past 5 Years

India’s Income Tax Department is now targeting past crypto activity, with many traders receiving notices linked to the Financial Year 2021–22.

Individuals who bought, sold or held Bitcoin (BTC), Ethereum (ETH) or other virtual digital assets (VDAs) during that period are being asked to explain potential unreported income.

This marks a clear escalation in enforcement, as authorities use data-matching tools to track crypto transactions more closely.

If you traded crypto in FY 2021–22—whether on Indian platforms like WazirX and CoinSwitch or global exchanges like Binance—you could receive a notice.

What Section 148A Notices Mean

These notices, issued under Section 148A of the Income Tax Act, are not final tax demands.

They serve as “show-cause” notices, informing taxpayers that income may have escaped assessment and requesting an explanation, usually within 7 to 30 days.

If the response is not satisfactory, the tax department can reopen the assessment for FY 2021–22, potentially leading to additional tax, interest and penalties.

How Indian Authorities Are Tracking Crypto Activity

The enforcement relies heavily on automated data checks.

The Income Tax Department uses systems such as the Insight Portal and CRIU to match PAN-linked data across multiple sources, including:

KYC details submitted to crypto exchanges
Bank transaction records
Trading volumes reported by platforms
Filed Income Tax Returns (ITRs)

In some cases, the system flags total transaction volume as potential income instead of actual net profit.

For example, a trader with an annual turnover of ₹1.6 crore ($172,000) but only ₹4–5 lakh (nearly $5000) in profit could still receive a notice treating the full amount as taxable.

Why FY 2021–22 Is Under Focus

The scrutiny centers on FY 2021–22 because it predates India’s formal crypto tax framework.

Before April 1, 2022, crypto gains were taxed under general rules as business income or capital gains.

There was no flat 30% tax, no dedicated reporting category and no TDS mechanism.

This lack of clarity led many traders to underreport or misreport their crypto activity.

Crypto tax platform KoinX said on April 6, 2026, that Section 148A notices are now being issued to crypto investors across India, with many tied to FY 2021–22 transactions.

The firm noted that these notices are largely data-driven and can typically be resolved with proper documentation

Who Is Receiving These Notices

The notices are primarily targeting crypto traders and investors active during FY 2021–22.

This includes individuals who:

Reported high trading volumes on domestic or international exchanges.
Did not file ITRs or underreported crypto activity.
Used multiple wallets or platforms, creating gaps in reporting.

Even non-filers for Assessment Year 2022–23 are being flagged.

While high-volume traders (over $100,000) face greater scrutiny, smaller traders are also at risk if discrepancies appear in their Annual Information Statements (AIS).

Social Media Amplifies Concern

Reports of these notices have quickly spread online.

Users on X and Instagram have shared redacted copies showing official Income Tax Department branding, PAN details and references to Section 148A notices for AY 2021–22.

One widely circulated post from KoinX includes a warning graphic featuring Prime Minister Narendra Modi and a cautionary message:

“If you traded crypto on any crypto exchange in FY 2021-22, you could receive a tax notice.”

India’s Strict Crypto Tax Regime

India’s crypto tax framework remains one of the most stringent globally.

Since FY 2022–23, gains from virtual digital assets are taxed at a flat 30% under Section 115BBH, along with surcharge and a 4% cess.

This can push the effective tax rate to as high as 42% for top earners.

The rules also restrict loss adjustments, allowing set-offs only against future crypto gains.

In addition, a 1% TDS applies to most transactions.

This tax structure has significantly reshaped trading behavior.

Industry estimates suggest that up to 75% of crypto trading volume has shifted to offshore platforms, as users try to avoid TDS and high taxes.

Domestic exchanges have seen lower activity, affecting revenue and slowing innovation.

Retail participation has also cooled, with many investors moving funds into stablecoins or foreign platforms.

Compliance Push and New Rules

At the same time, stricter enforcement has improved compliance.

The government recently reported issuing over 44,000 notices related to undisclosed crypto income, recovering substantial amounts.

New rules effective April 1, 2026, further tighten oversight.

These include daily penalties of ₹200 (~$2) and fines of up to ₹50,000 (~$500) for inaccurate reporting by crypto platforms.