India’s Income Tax Department sent 44,057 emails and messages to crypto traders who failed to report transactions for FY 2022-23 and 2023-24.
India’s Income Tax Department has issued thousands of notices to crypto merchants who neglected to disclose their transactions in their tax returns, as part of a significant enforcement initiative. The Central Board of Direct Taxes (CBDT) has identified numerous non-compliant crypto transactions, as indicated by a recent statement from the Ministry of Finance.
India Takes Action Against Unreported Crypto Transactions
Minister Pankaj Chaudhary, the Finance Minister of India, announced in an official statement that the department has implemented measures against crypto traders discovered to be non-compliant. Reassessment notices and seizure operations are among the measures implemented following the Income Tax Act of 1961. This significant development indicates a more stringent approach to tax compliance in India’s digital asset sector.
The Central Board of Direct Taxes (CBDT) has initiated a targeted awareness initiative as part of its NUDGE campaign. This is particularly noteworthy. The program aims to increase voluntary compliance among crypto merchants by sending 44,057 emails and messages to individuals who traded or invested in Virtual Digital Assets (VDAs) without reporting them in their ITRs. The Finance Minister declared,
To create awareness among taxpayers regarding the disclosure of VDA and payment of tax, CBDT has recently launched NUDGE…taxpayers campaign under which 44,057 emails and messages have been sent to select taxpayers who had invested and traded in the VDAs (virtual digital assets) but did not report the transactions in schedule VDA of their… (ITRs).
India is still in the process of establishing precise crypto regulations, and it is lagging behind major global economies such as the United States. Nevertheless, the government has previously expressed its intention to reevaluate its stance on cryptocurrency.
In addition, the Minister of State disclosed that the government collected ₹705 crore (approximately $80 million) in taxes from Virtual Digital Asset (VDA) income between FY23 and FY24. Furthermore, inspections and surveys revealed ₹630 crore ($75 million) in previously unreported income from these assets.
Taxation of Cryptocurrencies in India
Despite the ambiguity surrounding the legal status of crypto in India, income generated from Virtual Digital Assets (VDAs), which encompass cryptocurrencies and NFTs, is subject to taxation. Notably, India’s crypto tax regime includes a 30% fixed tax on income from virtual digital assets (Section 115BBH) and a 1% TDS on transactions that exceed specific thresholds. It also includes an 18% GST on service fees levied by crypto platforms for wallet management and trading services.
It is noteworthy that this examination occurs immediately following India’s recent decision to maintain the crypto tax regulations in their current form. The nation has elected to postpone the implementation of immediate modifications to its tax policies and cryptocurrency regulations, as previously reported.
In the most recent advancement, the CBDT employs sophisticated tools such as the Non-Filer Monitoring System (NMS) and Project Insight to verify tax filings with transaction data from Virtual Asset Service Providers (VASPs), guaranteeing crypto industry compliance.