Crypto Evasion Under Fire: India Launches Major Enforcement Blitz

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India’s tax authority has stepped up its game on crypto reporting. Thousands of taxpayers are getting notices about missing income from virtual digital assets.

The move comes as part of a wider push to spot hidden gains and possible money laundering through digital tokens.

Crypto Holders Under Scrutiny

According to officials, the Central Board of Direct Taxes is checking if people put their crypto trades in Schedule VDA of their returns. Many high‑risk profiles either under‑reported or skipped it altogether.

Crypto exchanges, or VASPs, file TDS reports, and those numbers don’t always match what shows up on income tax returns. That gap has triggered a wave of alerts and letters.

Flat 30% Tax Rule Explained

Based on reports, Section 115BBH of the Income Tax Act sets a flat 30% tax on gains from VDA transfers. You can only subtract the cost of buying the asset. No other deductions are allowed.

And you cannot set off any losses or carry them forward. A lot of taxpayers tried to use cost indexation or claim VDA losses under other heads. That mistake now carries interest charges and penalties.

NUDGE Campaign Targets Compliance

This is the third “NUDGE” ((Non-intrusive Usage of Data to Guide and Enable) drive in six months. The first two focused on undeclared foreign assets and false political donation claims under Section 80GGC.

The idea is to use data, not raids, to get people to fix their returns. The tax body combines bank data, TDS filings from VASPs and even blockchain checks. Officials say it’s a soft‑touch way to shape behavior without heavy‑handed tactics.

Risk For Traders And Exchanges

For anyone trading small amounts, the stakes just got much higher. If they’ve made a profit in crypto since the 2022‑23 fiscal year, they need to show it. A missed item in Schedule VDA could land them a notice and extra bills.

Exchanges also face pressure to report correctly. Any slip‑ups in their TDS filings could spark more inquiry into their customers.

Attention now turns to how traders and service providers will react. Some may roll out better record keeping. Others might cut back on trades to avoid the heavy tax. Institutions could take comfort that the rules are clear and enforced. That legal certainty may draw more serious players into the market.

Featured image from Unsplash, chart from TradingView

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