India Targets Crypto Tax Evasion wiht New Crackdown
India’s Income Tax Department is taking action against potential tax evasion and money laundering linked to cryptocurrencies. The department has identified individuals and entities involved in crypto transactions who have not followed the Income Tax Act, 1961.
The Central Board of Direct Taxes (CBDT) has sent emails to thousands, urging them to review and update their tax returns if crypto income was misreported or omitted. This is part of the CBDT’s NUDGE campaign, which encourages voluntary compliance.
This is the third NUDGE campaign in six months. Previous campaigns focused on foreign asset disclosures and false political donation deductions. even though India does not recognize cryptocurrencies as legal tender,income from Virtual Digital Assets (VDAs) has been taxable as April 2022.
Under Section 115BBH of the Income Tax Act, crypto income is taxed at a flat 30%, with no deductions except for the cost of acquisition. Losses cannot be offset or carried forward.
Officials are uncovering discrepancies through data analytics. These include 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 tax rates.
The crackdown comes amid concerns over the use of unaccounted income in high-risk crypto investments. While the government is exploring regulatory options for VDAs, including a possible ban, it has clarified that taxation does not imply formal approval of cryptocurrencies.
