- India sent 44,057 emails to taxpayers who failed to report VDA transactions
- Tax authorities detected ₹630 crores in undisclosed crypto income during raids
- New NUDGE campaign aims to increase compliance without intrusive measures
India’s Central Board of Direct Taxes has launched a comprehensive crackdown on cryptocurrency tax evasion. They also sent over 44,000 warning messages to taxpayers who failed to report Virtual Digital Asset transactions in their income tax returns. The enforcement action comes as tax authorities detected multiple cases of evasion involving cryptocurrency investments across the country.
The CBDT’s NUDGE (Non-Intrusive Usage of Data to Guide and Enable) campaign specifically targets individuals who invested and traded in VDAs but omitted these transactions from Schedule VDA in their tax filings. This initiative aims to create awareness about disclosure requirements while encouraging voluntary compliance before more aggressive enforcement measures.
₹705 Crores in Voluntary Compliance, ₹630 Crores Hidden
Tax collection data reveal that taxpayers voluntarily declared ₹705 crores in VDA-related income for financial years 2022-23 and 2023-24 since the introduction of Section 115BBH. This provision established a 30% flat tax rate on cryptocurrency profits, among the world’s strictest crypto taxation frameworks.
Search and seizure operations conducted by income tax authorities uncovered approximately ₹630 crores in undisclosed VDA transactions during the same period. These enforcement actions included surveys, raids, and asset seizures targeting suspected tax evaders in the cryptocurrency space.
The detection of hidden income through physical operations indicates substantial underreporting of cryptocurrency gains despite the legal requirement to disclose all VDA transactions.
Tax authorities are now using advanced data analytics to identify discrepancies between actual trading activity and reported income.
Advanced Data Analytics Drive Enforcement Efforts
India’s CBDT uses sophisticated tools including the Non-Filer Monitoring System, Project Insight, and internal databases to correlate VDA transaction information with taxpayer disclosures. These systems cross-reference data from multiple sources to identify potential tax evasion cases.
Tax Deducted at Source returns filed by Virtual Asset Service Providers are analyzed alongside individual taxpayer returns to detect discrepancies in reported cryptocurrency activities. This multi-source verification approach helps authorities identify patterns of non-compliance across different market participants.
The data correlation process enables tax officials to match cryptocurrency exchange records with individual tax filings, revealing gaps in disclosure that trigger further investigation. Advanced analytics help prioritize cases for enforcement action based on risk assessment and potential revenue recovery.
Escalating Enforcement Under Finance Bill 2025
Recent legislative changes in India through the Finance Bill 2025 have strengthened authorities’ powers to pursue cryptocurrency tax evasion cases. This aligns with India’s broader assertive policy stance on economic matters, as seen when the country hit back against U.S. tariff threats, signaling its readiness to protect national interests both in trade and in emerging digital asset regulations.
The bill amends Section 158B to classify VDAs as “undisclosed income,” enabling block assessments covering up to six previous years. Unreported crypto gains discovered during searches now face a 60% tax rate compared to the standard 30% levy on disclosed transactions.
This penalty structure creates strong incentives for voluntary compliance while providing substantial revenue recovery potential from enforcement actions.
Compliance Technology Targets Service Providers
Virtual Asset Service Providers face increased scrutiny through mandatory TDS reporting requirements that create transaction trails for tax authorities. Exchange platforms must file detailed returns showing user trading activities, creating comprehensive databases for compliance verification.
The integration of VASP data with taxpayer filing information helps in real-time monitoring of cryptocurrency transaction patterns. This systematic approach helps identify both individual non-compliance and potential systemic issues across service providers.
Tax authorities are developing specialized expertise in cryptocurrency transaction analysis to support enforcement efforts. Training programs for tax officials focus on blockchain technology, digital asset trading patterns, and investigative techniques specific to cryptocurrency markets.
India’s 30% flat tax rate on cryptocurrency profits ranks among the highest globally, with no provisions for loss offsetting or deductions beyond acquisition costs.
The strict framework aims to discourage speculative trading while ensuring government revenue from legitimate cryptocurrency investments.
