With over 7 crore income tax returns filed ahead of the August 31 deadline, Indian taxpayers, especially crypto traders, must navigate stricter reporting requirements and increased scrutiny for assessment year 2026-27.
India’s tax department said more than 7 crore income tax returns have already been filed for assessment year 2026-27, as taxpayers with business or professional income who are not subject to audit face an August 31 deadline. The department has urged people not to leave filing to the last moment, with the pressure particularly acute for crypto investors who may need to report virtual digital asset, or VDA, activity under the newer disclosure rules.
For many digital asset traders, the key issue is not simply whether they made a profit, but how the activity is classified. Frequent or large-scale trading can be treated as business income, which may push a filer towards ITR-3, while some taxpayers using the presumptive scheme may fall under ITR-4. According to the reporting, the latest filing cycle also brings added scrutiny through Schedule VDA, which requires transaction-by-transaction details such as acquisition date, transfer date, cost and consideration received.
That is a significant shift from relying on a single annual statement from an exchange. Taxpayers are being warned to reconcile exchange histories with wallet records, the Annual Information Statement and Form 26AS, because the figures often do not match cleanly. The mismatch can stem from cross-platform trades, swaps between tokens, self-custody transfers, foreign exchanges, peer-to-peer activity and differences in how fees and timing are recorded. The tax department’s 1 per cent TDS trail under Section 194S also needs to be checked carefully.
The tax burden itself remains heavy. Gains from VDA transfers are taxed at a flat 30 per cent under Section 115BBH, with surcharge and cess potentially lifting the effective rate further. Losses cannot be set off against other income, and traders who miss the August 31 deadline can still file a belated return under Section 139(4) until December 31, 2026, or until assessment is completed, whichever comes first. Late-filing charges under Section 234F and interest under Sections 234A, 234B and 234C may also apply, making early reconciliation and filing the safer option.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
