CBDT Launches Crypto Crackdown Targeting Non-Compliant Taxpayers

The Central Board of Direct Taxes (CBDT) in India has launched a large-scale investigation targeting individuals and entities that have failed to report income from Virtual Digital Assets (VDAs), including cryptocurrencies. This crackdown follows a data-driven analysis that revealed widespread non-compliance in the reporting of crypto income, with thousands of individuals and entities identified for either not disclosing or underreporting their crypto earnings. This action violates provisions under the Income Tax Act, 1961, and is now under close scrutiny by the tax authorities.

The CBDT has sent notices via email to those identified, urging them to review and update their Income Tax Returns (ITRs) to include any undeclared income from VDA transactions. A senior CBDT official confirmed that the department has taken this step to ensure compliance and detect potential tax evasion and money laundering activities. The key triggers for this crackdown include large crypto trades that do not match income disclosures, the use of undisclosed offshore wallets, crypto profits converted into cash without tax reporting, and the lack of foreign asset declarations by traders. This enforcement action is part of the CBDT’s NUDGE initiative (Non-Intrusive Usage of Data to Guide and Enable) under Section 80GGC, aimed at promoting transparency and legal compliance in the digital asset ecosystem.

Crypto investors who have received notices or believe their crypto income is not properly declared are advised to take immediate action. This includes reviewing past ITRs for any undeclared crypto gains, gathering records of all VDA transactions, and filing an updated return using ITR-U under Section 139(8A). Declaring crypto income separately from other capital gains can provide clarity and help avoid penalties and formal investigations. The CBDT has made it clear that this is a final reminder, and those who fail to respond may be subjected to verification or in-depth scrutiny. This action signals a stricter enforcement environment for crypto users in India, as the tax department steps up efforts to ensure transparency and legal compliance in the growing digital asset market.