Crypto Traders in India Risk 200% Penalties for Unreported Past Activity

India’s tax authorities have intensified enforcement on undisclosed cryptocurrency transactions, issuing notices to investors who failed to report earlier digital asset activity. According to Koinx, a crypto tax software provider, the Income Tax Department has begun sending Section 133(6) notices to individuals with undeclared trades, even from prior years.

Good to know

• Notices request full details for the 2022–23 financial year, including trade history, holdings, and linked bank accounts.
• Failing to respond can lead to penalties up to 200% of the tax avoided, reassessments, or even prosecution.
• India also recently banned all real money games, including fantasy sports, triggering major layoffs.

A sample notice shared online showed that authorities are asking for buy and sell dates, outstanding balances, and account information. Koinx explained the notices often result from mismatches in Form 26AS or Annual Information Statements, undeclared trades across centralized and decentralized exchanges, or failure to properly file tax deducted at source (TDS) returns.

The firm warned investors not to ignore the letters: “If you ignore a 133(6) notice? You’re looking at daily penalties, possible reassessments, heavy fines up to 200% of the tax avoided… and in extreme cases, even prosecution. Silence isn’t protection; it’s an invitation for more trouble.”

Koinx stressed that each notice requires a tailored response and urged taxpayers to maintain comprehensive records of all crypto transactions, including wallets and exchange accounts. The company also highlighted the difficulty of calculating crypto taxes manually and promoted its software, which integrates with more than 800 platforms to generate tax-compliant reports.

The crackdown is part of a wider trend in India where regulators are targeting digital assets and online gaming. Just last week, the government banned all real money games, including popular fantasy sports platforms. The decision shocked the country’s gaming industry and led to widespread layoffs, particularly in companies tied to cricket-based fantasy contests.