Crypto, ESOPs, overseas income: Experts say these are key triggers for today’s personal tax audit

The world of personal finance is changing fast and so are tax audits. For many Indians, crypto gains, employee stock options (ESOPs), and overseas income are now among the most common triggers for scrutiny by tax authorities. Experts say small oversights or reporting gaps in these areas can lead to audits, penalties, or even prolonged investigations.

Crypto assets

“Crypto transactions top this list. The introduction of taxation on Virtual Digital Assets (VDAs) at a flat 30% under Section 115BBH and 1% TDS under Section 194S has brought crypto under sharp audit scrutiny,” said CA Niyati Shah, Vertical Head – Personal Tax at 1 Finance.

Shah explained that auditors now check whether individuals have properly accounted for their crypto trades, documented the cost basis, and reconciled returns with the VDA schedule. She warned that even small mismatches between blockchain records and your tax return can invite questions.

ESOPs

ESOPs, especially those from multinational employers, are another common stumbling block.

“New and complex income sources like cryptocurrency, Employee Stock Ownership Plans (ESOPs), and foreign assets are major red flags for modern tax audits,” said Shikhar Aggarwal, Chairman of BLS E-Services.

“Employee Stock Ownership Plans (ESOPs) are a source of income that is frequently reported incorrectly, leading to audit triggers.” He advised employees to track the value of stock options at the time of exercise and reconcile them with payroll records to avoid discrepancies on their tax returns.

Foreign income 

Overseas income and foreign bank accounts are increasingly visible to Indian tax authorities due to global reporting frameworks such as FATCA and CRS.

Siddharth Maurya, Founder and Managing Director of Vibhavangal Anukulakara Private Ltd said that foreign sources of income and foreign bank accounts rentals and investments are important to report properly too as even small omissions can attract scrutiny. This is because tax authorities now have access to cross-border information that they didn’t have before.

Experts say that in today’s digital age, audits are less about questioning numbers and more about tracing your financial journey. They urge individuals to maintain proper documentation for crypto trades, ESOP exercises, and overseas investments, and to report everything accurately.

“Proper disclosure and compliance are essential to avoid legal repercussions,” said Aggarwal. For taxpayers, staying transparent and organised is the best way to keep both authorities and your peace of mind happy.

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