The Indian government on Monday admitted that it does not have a real-time system to monitor income from cryptocurrency transactions. This is despite it disclosing that it collected over ₹700 crore in taxes from such income in just two financial years.
In a written response in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary highlighted this issue. He said there is no system in place that allows the automatic matching of virtual digital asset (VDA) transactions reported by crypto exchanges with the figures declared by taxpayers in their income tax returns.
“Real-time matching of Virtual Digital Asset (VDA) related transactions, filed in income tax returns, with information filed by Virtual Asset Service Providers (VASPs) is not being carried out,” the minister said.
The statement came in reply to a detailed question from TDP MPs Lavu Sri Krishna Devarayalu and G M Harish Balayogi. The MPs sought year-wise tax collection figures from crypto-related income, details of any projected revenue loss due to underreporting, and the use of artificial intelligence tools to track evasion.
The government said no estimates have been made to quantify potential losses from misreporting of VDA income.
As for the tax collections, the government said crypto income has been taxable under Section 115BBH of the Income Tax Act since the financial year 2022–23. In the first year, ₹269.09 crore was collected, and the following year saw that number rise to ₹437.43 crore. Data for the ongoing fiscal year is not yet available.
While the government does not have a live monitoring setup, it said it relies on post-facto analysis to flag discrepancies. That includes tools like the Non-Filer Monitoring System (NMS), internal department databases, and Project Insight, an initiative aimed at identifying cases where reported income does not match third-party information.
To address gaps, the Central Board of Direct Taxes (CBDT) has also launched a campaign called NUDGE (Non-Intrusive Usage of Data to Guide and Enable). As part of that, the tax department has sent notices to individuals who failed to disclose crypto income despite tax being deducted at source.
“Suitable communications, to review and update their income tax returns, were issued to all taxpayers who did not report VDA-related transactions in their income tax returns, despite tax being deducted at source for such transactions by VASPs, where the quantum of such discrepancy was more than ₹1 lakh,” Chaudhary noted.
The government says it’s training tax officials to handle crypto cases more effectively. This includes holding workshops, giving them digital forensics training, and working with the National Forensic Science University (NFSU) in Goa to help officers understand how to read blockchain data and trace crypto transactions.
But despite these efforts, there’s still no central, real-time system to track crypto activity. That means enforcement is mostly reactive, by the time any issues are flagged, the actual transaction may have happened months ago.
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