Why did people start saying that there are 33 crore Gods in Hinduism? The question asks for as how did the rumor started and not if it's true or false.
The Vedas refer to not millions of deities but 33 supreme deities.
33 divinities are mentioned in the Yajur-veda, Atharva-veda, Satapatha-brahmana, and in several other Vedic and later texts. The number thirty-three occurs with reference to divinities in the Parsi scriptures of Avesta as well.The expressiontrayastrimsa deva is found in the list of classes of gods in Sanskrit Buddhist texts like the Divyavadana and Suvarnaprabhasa-sutra.
The word koti in trayastrimsati koti does not mean the number 'thirty-three crore'. Here koti means 'supreme', pre-eminent, excellent, that is, the 33 'supreme' divinities.
The word koti has the same meaning as uchha koti.
It was a problem even in AD 725 when Subhakarasimha and his Chinese colleague I-hsing translated the Mahavairocana-sutra into Chinese. They rendered the compound sapta-koti-buddha as shichi (sapta) kotei (koti) butsu (buddha) in which they did not translate the word koti that transliterated its pronunciation as kotei. The Buddhas were not 'seven crore', but only 'Seven Supreme Buddhas': six predecessors and the historic Buddha. Tibetan masters who translated Sanskrit texts into Tibetan, rendered koti by rnam which means 'class, kind, category'.
In the Brihadaranyaka Upanishad, chapter 3, Yājñavalkya has said that in reality there are only 33 gods and goddesses. Of these 8 are Vasus, 11 Rudras, 12 Adityas, and Indra and Prajapati.
8 Vasus + 11 Rudras + 12 Adityas + 2 Heaven and Earth ( 8+ 11 + 12 + 2 = 33).