India Is Sending Crypto Tax Notices for 2021 Trades—Even Small Investors Are Being Flagged

India’s tax authority is issuing Section 148A “show-cause” notices tied to crypto trades from FY 2021–22, using bank and exchange data to flag traders — including small retail participants. Notices target Bitcoin and Ethereum users and may treat gross transaction volumes as taxable income, prompting potential reopenings of assessments, additional tax, interest and penalties. The enforcement and new rules (effective April 1, 2026) — including daily ₹200 penalties and fines up to ₹50,000, plus the existing 30% flat crypto tax and 1% TDS — have already pushed trading offshore and cooled domestic activity, reducing volumes on Indian exchanges. While compliance and recoveries (over 44,000 notices reported) have improved, the immediate market impact is negative for onshore crypto liquidity and retail participation, likely weighing on local exchange revenue and trading depth for BTC and ETH exposure in India.