India’s Crypto Tax Crackdown: Unveiling the Hidden Enforcement Tactics

India Targets Crypto Tax Evasion with New Crackdown

India’s Income Tax Department has initiated a new campaign against tax evasion linked to cryptocurrencies. The department has identified individuals and entities involved in crypto transactions who have not complied with the Income Tax Act, 1961.

The Central Board of Direct Taxes (CBDT) has sent emails to thousands, urging them to update their tax returns if crypto income was misreported.This is part of the CBDT’s NUDGE campaign, promoting voluntary compliance. This is the third such campaign in six months, following similar drives for foreign assets and political donations.

Although India does not recognize cryptocurrencies as legal tender, crypto income has been taxable since April 2022. Under Section 115BBH, it is indeed taxed at a flat 30%, with few deductions.

Discrepancies are being uncovered through data analytics, including mismatches between income tax returns and filings by crypto exchanges. Some taxpayers failed to file the mandatory Schedule VDA or declared crypto income at lower rates. The government is exploring regulatory options for Virtual Digital Assets (VDAs), including a possible ban, but clarifies that taxation does not imply formal approval.

Key points include:

• Thousands urged to review tax returns for crypto income.
• Crypto income taxed at 30% as April 2022.
• Data analytics reveals mismatches in tax documents.

For more details, visit the Income Tax Department’s website.