What crypto investors need to know for tax season 2026
Tax season has a way of revealing how prepared or unprepared investors actually are. For crypto investors in India, this filing season carries more weight
Tax season has a way of revealing how prepared or unprepared investors actually are. For crypto investors in India, this filing season carries more weight than before. The rules have not changed dramatically, but enforcement has, and the consequences of getting it wrong are more serious than most investors realise.A New Act, The Same ObligationsThe Income Tax Act, 2025 came into force on April 1, 2026, replacing the 1961 Act. For investors filing for FY 2025-26, the old Act's provisions still govern your obligations. The core framework remains intact: a flat 30% tax on profits from Virtual Digital Assets, a 1% TDS on transfers exceeding Rs 10,000, no deductions except the cost of acquisition, and no ability to offset losses from one crypto asset against gains from another.The new Act renumbers the governing sections and explicitly adds "crypto-asset" to the VDA definition, but the substance of the obligations has not changed. If you have been filing correctly under the old Act, the transition requires no dramatic adjustment. What has changed is the penalty framework, and that deserves your attention.The Right Form, Filled CorrectlyFor FY 2025-26, investors file under ITR-2 if reporting crypto as capital gains or ITR-3 if crypto trading constitutes business income.
Both forms contain a dedicated Schedule VDA section where all crypto transactions must be reported.This is the step where most errors happen.Schedule VDA requires transaction-by-transaction entry, not just a summary of your net gains. Every trade, every swap, every disposal needs to be listed individually. Investors who have traded across multiple platforms, used DeFi protocols, or moved assets between wallets will find this the most demanding part of the process. The data needs to be accurate, complete, and consistent with what your exchange has already reported.Failing to report even a single crypto-to-crypto swap can trigger penalties for non-disclosure. A swap between two tokens is a taxable event in India, and many investors still treat it as a portfolio reshuffling rather than a reportable transaction. It is not.Why Accuracy Matters More Than Ever This YearBudget 2026 introduced a significant structural change: crypto exchanges, custodians, and wallet providers are now required to furnish user-level transaction statements directly to the Income Tax Department. This data is then cross-referenced against your ITR automatically. If your declared income in Schedule VDA does not match what your exchange has reported, the system flags it.The Income Tax Department has already issued over 44,000 notices and detected more than Rs 888 crore in undisclosed VDA income.
The BriefWire