Tax filing 2026: Missed crypto income in ITR? Why investors could receive an Income Tax notice

Tax filing 2026: Crypto investors who have failed to report their digital asset income in their income tax returns could come under the tax department’s scrutiny if their ITR details do not match transaction data reported by cryptocurrency exchanges.

According to Punit Agarwal, Founder and CEO of KoinX, a cryptocurrency tax and portfolio management platform, investors should not assume that unreported crypto transactions remain invisible to the Income Tax Department.

“Most crypto exchanges operating in India deduct TDS under Section 194S and report that data independently of your ITR,” Agarwal told Business Today. If an ITR shows no crypto income while an exchange has reported TDS against the taxpayer’s PAN, the mismatch can immediately flag a gap in the taxpayer’s reporting.

“The department already has the transaction on record before you file anything. Your ITR not reflecting it is what draws attention, not the transaction itself,” he added.

What should investors do if they missed reporting crypto income?

Investors who discover that they completely omitted crypto income from their ITR should first establish the correct amount of income rather than attempting to estimate it.

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Agarwal advised investors to collect transaction histories from every crypto exchange they used during the relevant financial year and calculate gains under Section 115BBH. Depending on the applicable filing window, taxpayers should then file a belated or revised return.

Importantly, simply paying the tax does not resolve an omission in the ITR. “The return itself has to show the income,” Agarwal said, adding that investors should not ignore an omission merely because the amount involved is small.

Why waiting for a notice can be costly

For investors who already know that their returns contain an omission or reporting error, voluntarily correcting the information could be preferable to waiting for a tax notice.

“Correcting voluntarily costs tax and interest. Waiting for a notice adds a penalty on top of both, and in serious cases, prosecution enters the picture,” Agarwal said. He also pointed to a practical consideration: once a notice is issued, the taxpayer has to respond within the department’s timeline rather than addressing the discrepancy proactively.

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Common crypto-tax mistakes

Agarwal identified several recurring errors among crypto investors. One is netting gains and losses across different assets, despite the requirement to calculate transactions individually. Losses under Section 115BBH also cannot be offset in the manner investors may assume.

Incomplete records are another problem, particularly for investors who trade across multiple exchanges but use transaction data from only one platform. This can result in both gains and TDS credit being understated.

Finally, investors often fail to reconcile the TDS reported by exchanges with the TDS they claim. Agarwal said these figures should match, making reconciliation an important check before filing the return.

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