Updated Penalty Tracker for Unreported Income (Crypto, Freelance, Overseas Assets)

In recent years, India’s income tax rules have tightened a lot, especially regarding new income sources like cryptocurrencies, freelance work, and overseas assets. While these opportunities are promising, many taxpayers don't realize the serious penalties for unreported income that can build up silently over time.

Imagine that you invested in Bitcoin in 2018, worked with international clients, or owned assets abroad, but never reported them in your Income Tax Return (ITR). Fast forward to today. The government has increased enforcement. Not reporting these could lead to hefty penalties and interest charges. So, how does India’s new penalty system work? Let’s break it down here.

1. Crypto Tax Penalty India

The government is closely watching crypto since the 2022 Finance Act introduced a flat 30% tax on gains from crypto assets and a 1% TDS on transactions. Failing to report these gains can lead to penalties:

• Non-disclosure of crypto income can lead to a penalty of up to 200% of the tax that you have avoided.
• There is also an additional 1% interest per month on the unpaid tax amount.

2. Freelance Late Reporting Fee

Freelancers earning from global clients often don’t know about tax filing deadlines and income reporting rules. However, late or missed declarations can result in:

• A flat fee penalty of Rs. 5,000 under Section 234F for filing ITR after the due date.
• An Interest of 1% per month will be levied on the unpaid tax on freelance income under Section 234A.
• Continued delay or intentionally hiding freelance income can lead to higher scrutiny and bigger penalties.

3. Penalty for Overseas Assets

All foreign assets i.e., bank accounts, investments, or real estate, must be reported accurately under Schedule FA of the ITR. Not doing this can now lead to:

• Penalties up to Rs. 10 lakh and imprisonment from 6 months to 7 years, whichever is greater. However, penalty and imprisonment is not applicable if the aggregate value of foreign assets (other than immovable property) does not exceed Rs 20 lakhs.
• A higher chance of income tax notices and detailed assessments.
• Large fines for underreporting or incorrect disclosures.
• Even old undisclosed overseas assets can lead to penalties, as the government can review your filings from the past.

4. How to Fix Old Income Tax Mistakes

It’s never too late to correct past filing errors. The Income Tax Department lets you file a revised ITR or submit a request for correction if you find mistakes.

• Fixing errors can help reduce penalties and prevent tougher actions for tax evasion.
• For crypto or overseas assets not reported in previous years, the voluntary disclosure option is the best way to avoid ongoing penalties.

Conclusion

The tax landscape for new income sources is changing quickly. Ignoring the penalties for unreported income, whether from crypto, freelance work, or overseas assets, can result in major financial and legal issues. Hence, you should once review your past filings, calculate what you owe, and file revised returns if necessary. And if you are thinking of fixing your past mistakes, visit Taxspanner website and book a consultation with our experts to stay compliant with the taxes.