Key Takeaways
- India’s Income Tax Department has issued over 44,000 notices to crypto traders for failing to report digital asset income.
- Authorities uncovered $75 million in unreported gains and have collected $85 million in back taxes.
- Despite aggressive tax enforcement, crypto remains in a legal gray area in India.
India is tightening the screws on crypto tax evasion.
The country’s Income Tax Department has fired off over 44,000 email notices to individuals who either underreported or failed to declare their crypto income over the past two financial years.
The enforcement campaign follows the government’s broader push to crack down on undisclosed virtual asset gains.
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$75 Million in Unreported Crypto Income
According to local reports, authorities uncovered nearly ₹630 crore ($75 million) in unreported revenue from Virtual Digital Asset (VDA) transactions, including Bitcoin (BTC), across FY 2022–23 and 2023–24.
This figure stands in contrast to the ₹705 crore ($83.75 million) in VDA income that was voluntarily reported by taxpayers during the same period.
To improve compliance, the Central Board of Direct Taxes (CBDT) launched its “NUDGE” initiative, short for Non-Intrusive Usage of Data to Guide and Enable, which relies on digital intelligence tools to identify non-filers.
Tax authorities used systems like Project Insight, the Non-Filer Monitoring System (NMS), and internal data tracking tools to match transactions reported by Virtual Asset Service Providers (VASPs) with individual tax returns.
When discrepancies surfaced — such as undeclared profits or missing Schedule VDA entries — the department issued formal notices, with further action underway in some cases.
Crypto Tax Policy: A Double-Edged Sword
India has one of the most aggressive crypto tax policies in the world: a flat 30% tax on profits and a 1% TDS (Tax Deducted at Source) on every transaction.
But instead of encouraging transparency, these steep levies have reportedly driven many investors offshore or underground.
Several Indian crypto companies have relocated to jurisdictions with friendlier tax environments, including Singapore, Dubai, and the British Virgin Islands.
Worse, the country’s stance on crypto remains legally ambiguous. Digital assets are neither fully legal nor illegal, creating a murky regulatory environment where tax rules exist without a defined framework.
This vacuum has allowed exchanges like WazirX to exploit legal loopholes — such as incorporating its parent firm in Singapore — to restructure and distance itself from scrutiny following its $230 million hack.
While India Waits, Others Move Forward
As the Indian government leans heavily on tax enforcement without offering a regulatory roadmap, other countries are taking steps to integrate and innovate.
From the EU’s MiCA regulation to U.S. stablecoin legislation, governments are aiming to strike a balance between oversight and growth.
Meanwhile, India risks stalling innovation by treating crypto primarily as a revenue target rather than a long-term asset class.
With enforcement tightening, more clarity, not just compliance, may be needed to keep the industry within India’s borders.
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Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
Beyond his professional pursuits, Prashant is an avid music enthusiast, often exploring diverse genres to unwind. A sports lover, he has a particular passion for cricket and frequently engages in discussions about the game. His multifaceted interests and sharp journalistic instincts make him a valuable contributor to CCN, where he continues shaping the crypto landscape's narrative.
