CBDT sends notifications to thousands of people for undeclared income

India’s Central Direct Tax (CBDT) has launched a massive investigation of individuals and entities that have failed to report income from virtual digital assets (VDAs), including cryptocurrencies.

what happened?

CBDT has identified a wide range of noncompliances related to crypto income, sent notifications via email, and asked the recipient to update their income tax returns (ITRs).

“The department recently sent an email to thousands of default people, reviewed the ITR and updated it if revenues were not properly declared for VDA (virtual digital assets) transactions,” a senior CBDT official confirmed.

Unfiled income violates the following regulations Income Tax Act, 1961 And now they are under close scrutiny.

Why CBDT launched this probe

This enforcement action is part of CBDT’s Nudge initiative under Section 80GGC (a non-infringing use of guides and data that will be effective). The focus is on detecting tax evasion and money laundering in cryptographic activities.

The key triggers for crackdown are:

• Large crypto transactions do not match revenue disclosure
• Using private offshore wallets
• Cryptocurrency profits were converted to cash without tax reporting
• Lack of foreign assets declarations by traders

The measure is consistent with the Indian government’s efforts to bring transparency to the digital assets ecosystem and combat financial crimes involving crypto.

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What Crypto investors need to do

If you receive notifications or believe that your crypto income is not properly declared, follow these steps:

1. Check past ITRs for undeclared crypto benefits
2. Collect records of all VDA transactions
3. Submit an updated return using ITR-U based on section 139(8a)
   
4. To make it clear, declare crypto income separately from other capital gains

Timely compliance can help avoid penalties and formal investigations.

What’s next?

CBDT has made it clear that this is the final reminder. Those who do not respond to notifications Verification or detailed scrutiny.

“People who do not respond to the nudge may be chosen for verification or scrutiny,” CBDT warned.

This action illustrates a more stringent enforcement environment for crypto users in India. As virtual assets grow in popularity, the tax sector is stepping up its efforts to ensure transparency and legal compliance.