India Leverages AI and OECD Framework to Crack Down on Crypto Tax Evasion, Collects ₹700 Crore

India’s tax enforcement authorities are leveraging artificial intelligence and international data-sharing frameworks to intensify efforts against crypto tax evasion, marking a significant escalation in regulatory scrutiny. The Central Board of Direct Taxes (CBDT) confirmed in an interview with the Economic Times that it is utilizing AI-driven analytics to cross-reference tax deducted at source (TDS) data from crypto exchanges with income tax returns (ITRs), issuing automated notices when discrepancies exceed ₹1 lakh ($1,200) [1]. This initiative, led by CBDT Chairman Ravi Agrawal, underscores a shift toward proactive enforcement as digital assets become increasingly integrated into global financial systems.

Agrawal highlighted that India’s access to over 6.5 billion domestic digital transactions has bolstered its capacity to trace unreported crypto activities. The country is also a key participant in the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF), a global standard requiring crypto platforms to collect and share user transaction data with tax authorities for cross-border exchange [2]. This alignment with OECD protocols aims to close loopholes for offshore holdings and create a unified approach to crypto taxation.

The crackdown follows India’s 2022 tax overhaul, which imposes a 30% levy on crypto profits and a 1% TDS on transactions above specified thresholds. Since implementation, the government has collected ₹700 crore ($818 million) in crypto taxes, with ₹269.09 crore ($323 million) in the first year and ₹437.43 crore ($525 million) in 2023-24 [3]. Minister of State for Finance Pankaj Chaudhary noted that while data analytics tools are actively used to detect evasion in Virtual Digital Asset (VDA) transactions, real-time matching of ITRs with information from virtual asset service providers (VASPs) remains pending [4].

Industry experts acknowledge the regulatory momentum but caution about its long-term implications. Saravanan Pandian, CEO of KoinBX, emphasized CARF’s role in harmonizing international tax alignment, though he stated it is “too early to comment on how this may impact exchanges.” CA Sonu Jain of 9Point Capital highlighted the balance struck between enforcement and privacy, noting that wallet-level access or crypto account reviews are restricted to official search and survey operations, such as tax raids [5].

The enforcement measures reflect a broader strategy to address the anonymity traditionally associated with crypto transactions. Agrawal underscored that digital evidence examination is now integral to investigations, as financial activity migrates to digital banking, crypto platforms, and cloud storage. This approach aligns with global efforts to integrate crypto into formal tax systems, ensuring compliance without undermining user privacy protections.

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