Bought some Bitcoin or Ethereum back in 2021, made a bit of money, and never quite got around to reporting it? You're not alone — and until now, that gap between what you traded and what you filed mostly stayed invisible to the tax department. That's about to change. From April 1, 2026, crypto exchanges operating in India are required to share user transaction data directly with the Income Tax Department. If you've ever bought, sold or swapped a virtual digital asset (VDA) through an Indian exchange, your trail is no longer just sitting on a server somewhere — it's headed straight to the department's desk.

Nothing Changed in the Rate, Everything Changed in the Enforcement

Let's be clear: Budget 2026-27 left the actual tax rate untouched. Gains from crypto and other VDAs are still taxed flat at 30% under Section 115BBH, plus a 4% cess. There's no slab benefit, no indexation, and — this trips people up every year — no set-off against other losses and no carry-forward. Lost money on one coin and made money on another? Doesn't matter. Each gain is taxed on its own; losses can't rescue you here. What the government has doubled down on instead is compliance and detection.

The 1% TDS You Probably Didn't Notice

Section 194S has quietly been deducting 1% TDS on VDA transfers for a while now — it applies once the transaction value crosses ₹10,000 in a year (₹50,000 for specified categories of buyers). Most retail traders barely notice this deduction happening at the exchange level, assuming it's "handled." It isn't, not entirely. That 1% TDS is only an advance against your final tax liability — you still need to report the gain in your return and pay the balance of the 30% plus cess. Treating the TDS deduction as the end of the story is one of the most common mistakes we see.

What Actually Changes From April 2026

Up to now, the department largely relied on you to self-report crypto gains, with exchanges holding the transaction data but not routinely handing it over. That's the piece that flips. Exchanges must now report user-level transaction data directly, which means the department can cross-check what you filed against what you actually traded — automatically, at scale, without waiting for a scrutiny notice. Miss reporting a transaction and the exchange fails to disclose it correctly, and penalties apply on the exchange's side too: ₹200 per day for failure to report, and up to ₹50,000 for incorrect disclosures. For you as the trader, the practical effect is simple — assume every trade you've ever made is now visible.

The Real Danger: Old, Undisclosed Gains

Here's where it gets expensive. If unreported crypto income turns up during a search or tax audit, it doesn't get taxed at the usual 30%. It falls under Section 158B as undisclosed income and is taxed at 60%, and once you add surcharge and cess, the effective rate lands close to 78%. No deductions, no set-offs, nothing to soften it. That's not a typo — nearly four out of every five rupees of an old, undisclosed crypto gain can end up going to tax and penalty if it's discovered rather than voluntarily reported. We've already started seeing income tax notices going out to people who assumed their 2020-2022 trading history was forgotten. It wasn't.

What To Do If You've Been Sitting on Old Crypto Gains

If you've traded VDAs and aren't fully confident your returns reflect every transaction, don't wait for a notice to force your hand. Pull your complete transaction history from every exchange you've used, reconcile it against what was actually filed, and where there's a gap, look at filing an updated return before the department's data-matching catches it first — voluntary disclosure is treated very differently from a gain uncovered in a search. It's also worth checking whether TDS credited under Section 194S has actually been claimed correctly in your return; we regularly find clients who paid the TDS but never adjusted it against their final liability.

How Gadhia Associate Can Help

We help clients reconcile crypto transaction histories across multiple exchanges, work out the correct tax liability under Section 115BBH, and file updated returns where gaps exist — before they turn into a notice. If you've traded virtual digital assets and want to know exactly where you stand before April 2026, reach out to Gadhia Associate for a confidential review.