Many crypto investors only find out there’s a reporting gap after they’ve already filed their return. In FY 2022-23, around 6.45 lakh investors had TDS deducted on crypto trades. Only 1.39 lakh of them actually reported that income in their ITRs. That means a large chunk of transactions never got matched in the Income Tax Department’s records, even though the TDS was already deducted.
This gap isn’t about anyone trying to dodge tax. It happens because crypto tax rules are more layered than most people expect. It’s easy to assume TDS covers your entire tax bill, or that a small trade isn’t worth reporting. Neither is true, and these small misunderstandings have left many honest investors with incomplete returns.
That’s why we, at Mudrex, have partnered with KoinX: to give you a simple way to fix this. If you missed reporting crypto income in an earlier year, you can still correct it by filing an ITR-U. And the sooner you act, the less likely it is to turn into a bigger compliance headache.
What Is ITR-U?
ITR-U, or Updated Return, lets you voluntarily fix a return you’ve already filed, or file one you missed altogether. It exists so honest mistakes, like income left out or a wrong deduction, get corrected before a tax notice shows up, not after.
You can file ITR-U under Section 139(8A) of the Income Tax Act. This section lets you go back up to 4 financial years from the year you’re currently filing. So if you’re filing for FY 2025-26, you can still use ITR-U to fix FY 2021-22, FY 2022-23, FY 2023-24, or FY 2024-25.
Now that you know what ITR-U is, let’s look at the mistakes that usually lead Mudrex users to need one.
4 Crypto Tax Mistakes That Lead to an ITR-U
Most people who end up filing an ITR-U weren’t trying to hide anything. They made one of these four assumptions, each one reasonable at the time, but wrong. Here’s what trips people up most often:
“TDS Was Already Deducted, So My Tax Is Paid”
Many investors assume that once an exchange deducts 1% TDS on a trade, they’re done. That’s not how it works. TDS helps the ITD track crypto transactions, but it doesn’t settle the tax on your actual gains. You still need to calculate your profit and report it separately under Schedule VDA when you file.
“I Traded on a Foreign Exchange, So It Doesn’t Count”
Trading only on foreign exchanges like Binance or Bybit often leads people to think that income sits outside Indian tax rules. It doesn’t. What matters is your residential status, not where the exchange is based. If you’re an Indian resident, any crypto gains from overseas platforms are taxable in India and must go under Schedule VDA.
“Crypto-to-Crypto Swaps Aren’t Taxable”
Many traders assume swapping one coin for another isn’t taxable, since no rupees changed hands. But Indian crypto tax law treats a crypto-to-crypto swap as the transfer of a virtual digital asset (VDA). So any profit from that swap is taxable, even if you never touched fiat currency.
“This Trade Was Too Small to Matter”
Some investors skip reporting a trade because the profit seems too small to bother with. But there’s no minimum threshold for reporting VDA transactions. Every disposal needs to be reported on its own. Small unreported gains add up, and that’s exactly the kind of gap the ITD can catch during return verification.
What Changed for ITR-U in Budget 2026?
Until this year, getting a reassessment notice shut the door on ITR-U completely. The Finance Bill 2026 changes that. Here’s what’s different now:
ITR-U Used to Close the Moment You Got a Notice
Under the old rule, once the ITD issued a notice under Section 148, you lost the option to file an updated return. Your only path left was to contest the reassessment through the full assessment process, with no shortcut available.
Finance Bill 2026 Reopens That Door
The Finance Bill 2026 removes that old restriction. You can now file ITR-U even after a Section 148 reassessment notice has landed, something that wasn’t allowed before. It does cost more than a routine updated return, since the additional tax is higher once a notice is already in the picture.
That extra cost buys real protection, though. Filing this way shields your disclosed income from the penalty under Section 270A, which normally runs to 50% of the tax owed, and can climb to 200% for deliberate misreporting.
This change gives you another shot at fixing past mistakes. But acting early matters more than ever, because the ITD’s visibility into crypto transactions is about to expand.
ALSO READ: What Section 148A Means for Traders
What’s Coming in 2027: Your Foreign Trades Won’t Stay Hidden
From April 2027, trades on foreign exchanges will stop being invisible to the ITD. This is thanks to the Crypto-Asset Reporting Framework (CARF), a new international system that feeds transaction data straight to the ITD. What used to be a reporting gap is quickly becoming visible.
What Is CARF?
CARF is an OECD framework that lets crypto exchanges automatically share user transaction data across participating countries. India has committed to CARF, with cross-border data exchange starting in April 2027. Meanwhile, the CBDT has already started collecting domestic data, under a notification issued in early 2026.
What This Means If You Trade on Foreign Exchanges
Once CARF goes live, transactions on exchanges like Binance, Bybit, and Kraken won’t stay outside the ITD’s view. That data gets shared automatically, which makes offshore trading activity a lot more transparent than it used to be.
Why Filing an ITR-U Matters Now More Than Ever
If you missed reporting crypto transactions in an earlier return, waiting longer only raises your risk. With stronger reporting systems, AIS matching, and the ITD’s growing visibility, filing an ITR-U now lets you fix past gaps before they draw scrutiny. Here’s how that plays out:
Filing Voluntarily Works in Your Favor
Right now, the ITD mostly sees what Indian exchanges report through TDS, so foreign exchange activity often stays out of view. That gap narrows once CARF data starts flowing, and offshore trades left out earlier could turn into a mismatch. Filing ITR-U before that happens means you’re correcting things on your own terms, and that’s treated far better than a correction made after the fact.
Waiting Costs More
Delaying a correction can raise what you owe by a lot. If the ITD catches under-reported income on its own, through reassessment or scrutiny, the resulting tax carries a 50% penalty under Section 270A, rising to 200% if it looks like deliberate misreporting. In serious cases involving wilful tax evasion, prosecution and imprisonment under Section 276C can also apply.
How Mudrex and KoinX Help You File an ITR-U
We built this partnership because most Mudrex users don’t want to become tax experts; they just want their filings to be right. KoinX handles the report generation and connects you with a CA when you need to actually file. Here’s how that’s played out for two Mudrex users:
Case 1: A Mudrex User Responding After a Notice
A user received a Section 133(6) notice from the ITD last financial year, questioning undisclosed crypto transactions. They reached out through the Mudrex-KoinX partnership for help.
KoinX arranged a call to walk through why the notice was issued and what fixing it would involve. From there, they generated the user’s crypto tax report for that year using their Mudrex trading history, and connected them with a partnered CA to file the ITR-U. The user also opted into a dedicated plan covering the formal reply to the notice.
The result: the updated return and the notice reply went in together, giving the user a documented response instead of an open notice sitting on file.
Case 2: A Mudrex User Responding Before a Notice
Another Mudrex user came across forum discussions about Section 133(6) notices tied to undisclosed crypto income, some going as far back as FY 2021-22. Unsure whether their own filing was complete, they reached out proactively before any notice arrived.
Using their Mudrex account data, KoinX generated tax reports for the year in question. As a precaution, the user chose to disclose their full crypto income and gains through an ITR-U rather than wait and see if a notice would follow.
It’s been a year since that filing. No notice has arrived.
How to Avoid Filing Another ITR-U
Fixing past mistakes is only half the job. The other half is making sure every future return is built on accurate data from the start, so you never need an ITR-U again.
Your Full Mudrex History, Not Just This Year
When you connect your Mudrex account to KoinX, it doesn’t just pull this year’s data. KoinX generates complete tax reports for every financial year across your full trading history on Mudrex. That means an ITR-U for FY 2021-22 through FY 2024-25 draws from the same consolidated data, instead of being rebuilt from scratch each time.
Correct Treatment, Applied Automatically
Every trade going forward gets classified the way it should have been the first time. VDA transfers are taxed under Section 115BBH, TDS gets reconciled against the final computation, and futures activity is flagged separately as business income. Filing at year-end turns into a quick review of numbers that are already sorted, not a scramble to sort them yourself.
If you traded crypto on Mudrex in FY 2021-22, FY 2022-23, FY 2023-24, or FY 2024-25 and you’re not sure your filing was complete, now’s the time to check. Connect your Mudrex account to KoinX, see exactly what your reports show for each year, and file an ITR-U for anything that’s missing before the window narrows any further.
