India’s Financial Intelligence Unit (FIU) is cracking down on crypto traders using peer-to-peer (P2P) platforms without proper KYC. A recent case revealed a trader who made only ₹1,500 in profit from selling ₹98,500 worth of crypto in 2022—yet received a ₹78,000 tax penalty nearly three years later.
Indian Crypto Trader Hit with 78% Tax Penalty Over P2P Crypto Deal
The reason? Indian crypto trader couldn’t provide KYC details of the buyers. The income tax department classified the deposits as unexplained cash credits, triggering a steep 70% tax and additional penalties under Section 158B, as amended in the 2025 Union Budget.
Koinx founder Punit Agarwal explained that under these new rules, lacking buyer PAN details or KYC documentation can result in full deposits being treated as undisclosed income.
Tax experts are now urging Indian crypto users to maintain detailed transaction records, including counterparty KYC, especially when using P2P methods.
This case serves as a strong warning—minor profits in crypto could lead to major penalties if compliance isn’t met.
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