India’s tax authorities have discovered nearly 630 crore rupees (around $72 million) in undisclosed income from crypto-related transactions, as per a disclosure by Pankaj Chaudhary, the Minister of State for Finance, on August 5. The minister, referring to data from the Central Board of Direct Taxes (CBDT), revealed that the discrepancies in tax filings are linked to Virtual Digital Asset (VDA) trades.
Additionally, the government has collected over 705 crore rupees (more than $80 million) in taxes on crypto gains over the past two financial years. These revenues primarily stem from users who voluntarily declared income from digital assets like Bitcoin under the tax regulations implemented in April 2022.
Combatting tax evasion
To combat the substantial amount of undeclared tax revenue, Indian authorities have issued more than 44,000 notices to individuals and entities that failed to report earnings from crypto-related activities. This enforcement is part of a wider effort to enhance transparency in the digital asset sector and promote a more robust culture of tax compliance.
Chaudhary also disclosed that CBDT has deployed various data analysis tools, including the Non-Filer Monitoring System (NMS) and Project Insight, to enhance reporting accuracy. These systems compare VDA transaction data with taxpayer disclosures, such as Income Tax Returns (ITRs) and TDS returns filed by Virtual Asset Service Providers (VASPs), enabling authorities to identify disparities and take necessary measures.
Nevertheless, some industry leaders argue that the existing tax framework could be counterproductive. CoinDCX CEO Sumit Gupta highlighted that the combination of a 30% capital gains tax and a 1% tax deducted at source on every trade has pushed numerous Indian traders towards offshore platforms with limited oversight. This migration not only diminishes local participation but also reduces potential revenue.
Gupta proposed that India could significantly enhance its annual crypto tax collection, potentially surpassing ₹5,000 crore, by creating a more competitive domestic trading environment. He believes that a more balanced policy would stimulate long-term investment, diminish the attractiveness of offshore exchanges, and position India as a global center for digital finance.
