India’s tax authorities have recently uncovered a significant amount of undisclosed income from crypto-related transactions, totaling nearly 630 crore rupees (approximately $72 million). This revelation was made by Pankaj Chaudhary, the Minister of State for Finance, who cited data from the Central Board of Direct Taxes (CBDT) indicating discrepancies in tax filings related to Virtual Digital Asset (VDA) trades.
In addition to this undisclosed income, the government has collected over 705 crore rupees (more than $80 million) in taxes on crypto gains over the past two financial years. These tax revenues have been voluntarily reported by users under the tax regime introduced in April 2022, reflecting a growing awareness of tax compliance within the crypto community.
To tackle tax evasion in the digital asset space, Indian authorities have issued more than 44,000 notices to individuals and organizations that failed to report their crypto-related earnings. This enforcement action is part of a broader strategy to bring transparency to the crypto economy and promote a culture of tax compliance.
In order to improve reporting accuracy and identify discrepancies, the CBDT has implemented various data analysis tools such as the Non-Filer Monitoring System (NMS) and Project Insight. These tools allow authorities to cross-reference VDA transaction data with taxpayer disclosures, enabling them to take appropriate enforcement action.
Despite these efforts, some industry leaders have raised concerns about the current tax structure in India. CoinDCX CEO Sumit Gupta has pointed out that the high capital gains tax of 30% and the 1% tax deducted at source on every trade have pushed many Indian traders towards offshore platforms with less oversight. This trend not only reduces local participation but also diminishes potential tax revenue for the government.
Gupta suggests that India could significantly increase its annual crypto tax revenue, potentially exceeding ₹5,000 crore, by creating a more competitive trading environment domestically. By implementing a more balanced tax policy that encourages long-term investment and reduces the appeal of offshore exchanges, India could position itself as a global hub for digital finance.
In conclusion, the recent revelations of undisclosed income from crypto transactions in India highlight the importance of tax compliance in the digital asset space. With the government taking proactive measures to tackle tax evasion and industry leaders advocating for a more competitive tax structure, India has the opportunity to strengthen its position in the global crypto economy.