ITR Filing: Crypto Gains Not Declared? Know Consequences Of Not Reporting Crypto Earnings

Cryptocurrencies are slowly gaining popularity among investors in India. If you are involved in crypto trading, you should be prepared to report it accurately in your Income Tax Return(ITR) filing for FY 2024-25. Non-disclosure of earnings from transactions in cryptocurrencies and similar digital assets may lead to a notice from the Income Tax Department. It may even attract penalties, interest on unpaid taxes, and legal action.

Indian taxpayers using foreign crypto exchanges, like Binance, need to fill out Schedule FA (Foreign Assets) in addition to the VDA (Virtual Digital Assets) Schedule while filing the Income Tax Return (ITR). 

It’s mandatory for taxpayers involved in crypto trading to disclose all such income accurately in the ITR under ‘Schedule VDA’. Even the losses need to be reported.

If you don’t mention the crypto assets stored in your wallet while filing your tax return, the Income Tax Department may treat them as unexplained income or investment under Section 69A.

A revised return under Section 139(8A) should be filed before the deadline if you failed to add the cryptocurrency income in previous ITRs. 

The crypto traders should keep necessary documents ready, such as transaction history, wallet details, exchange reports and TDS details, to avoid fines and further investigation by the I-T Department.

The reason you must declare your crypto earnings is that the ITR now has a separate section for it under Section 2(47A,) which categorises them as "Virtual Digital Assets." You need to show all types of crypto assets, including tokens, cryptocurrency and NFTs. The gains from such assets are taxable at a flat 30%. Also, a 1% TDS is applicable on the total transaction amount at the time of selling.

According to ICAI, this time, the I-T Department has access to detailed data about people's undisclosed crypto income, even if the transaction was done through foreign crypto exchanges and not Indian platforms.