India Sends 44,057 Crypto Tax Notices as Scrutiny Intensifies

Indian authorities have escalated their scrutiny of cryptocurrency tax compliance, with the Income Tax Department sending over 44,000 notices to traders who failed to report income or transactions related to virtual digital assets (VDAs). The move is part of a broader initiative by the Central Board of Direct Taxes (CBDT) to combat tax evasion in one of the world’s fastest-growing crypto markets. Minister of State Pankaj Chaudhary confirmed that focused reassessment drives are underway, involving asset seizures under the Income Tax Act, 1961 [1].

To support these efforts, the CBDT has deployed advanced data analysis tools to cross-reference tax filings with transaction data from Virtual Asset Service Providers (VASPs). The NUDGE program, aimed at encouraging voluntary compliance, has already resulted in the delivery of 44,057 email and text alerts to traders suspected of non-compliance [1]. These communications serve as warnings to individuals who have engaged in digital asset trading without disclosing it in their tax returns.

India’s rapid crypto adoption has outpaced regulatory frameworks, with an estimated 100 million users and a growing rate of 7.1% of the population. This high market penetration has led the government to intensify efforts to close tax loopholes. In fiscal years 2023 and 2024, officials collected 705 crore rupees (about $80 million) in reported crypto earnings, while investigations revealed undisclosed earnings of at least 630 crore rupees ($75 million). These findings have triggered widespread tax reviews, raids, and asset seizures [1].

The Enforcement Directorate further highlighted the risks in the sector by seizing 42.8 crore rupees ($4.8 million) in assets linked to an Indian national who ran a fraudulent Coinbase clone site. The individual is already serving a 10-year sentence in the United States for a $20 million scam [1]. With growing concerns over financial misconduct, India’s Financial Intelligence Unit (FIU) has begun licensing both domestic and international exchanges. Major platforms such as Binance, Coinbase, KuCoin, and Bybit have received approval to operate under FIU oversight, enabling regulators to monitor transactions and enforce tax compliance more effectively [1].

India’s crypto tax regime remains among the strictest globally. Introduced in 2022, the framework imposes a flat 30% tax on all gains from virtual digital assets under Section 115BBH. Additionally, a 1% Tax Deducted at Source (TDS) applies to transactions exceeding specified thresholds. Digital assets, including cryptocurrencies and NFTs, are also subject to an 18% Goods and Services Tax (GST) on service fees charged by exchanges [1].

Despite industry criticism, the government has shown no sign of revising these policies. Instead, enforcement agencies have increased their use of surveillance and compliance tools. Systems such as Project Insight and the Non-Filer Monitoring System (NMS) are being used to link blockchain activity with tax reporting [1]. Under Indian law, failure to report crypto transactions can result in a 50% penalty on unpaid taxes, with fines rising to 200% in cases of intentional misreporting [1].

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Source: [1] Indian traders receive notices as regulators ramp up crypto tax evasion scrutiny (https://coinmarketcap.com/community/articles/6894a9218e030a50e32ca1f4/)