In a significant move to curb tax evasion, the Central Board of Direct Taxes (CBDT) in India has launched a detailed investigation into cryptocurrency investments. The probe focuses on high-risk persons who have failed to comply with the provisions of the Income Tax Act, particularly concerning unreported gains from virtual digital assets (VDAs) like Bitcoin and Ethereum.
The Income Tax Department, under the guidance of the CBDT, has identified numerous crypto transactions that appear to be unreported or underreported. Emails have been dispatched to defaulting individuals, urging them to review and rectify their income tax returns. This campaign underscores the government's determination to ensure compliance in the rapidly growing but largely unregulated crypto sector.
India's stance on cryptocurrencies has been notably strict, with a 30% tax on crypto gains introduced in 2022, alongside a 1% TDS (Tax Deducted at Source) on transactions. Additionally, penalties for late or unreported filings can range from 25% to 70% of the unpaid tax, depending on the delay, as part of the broader strategy to monitor digital asset transactions.
The latest investigation comes amidst ongoing discussions about the future of cryptocurrency regulation in India. While the government has previously considered a blanket ban on cryptocurrencies, it is now working on a discussion paper that explores options ranging from regulation to prohibition. This uncertainty continues to create challenges for investors and crypto exchanges operating in the country.
Prominent Indian crypto exchanges such as WazirX and CoinDCX have also faced scrutiny, with recent reports indicating unpaid taxes amounting to millions. The government aims to recover these dues and enforce stricter oversight, signaling to the industry that compliance with national tax laws is non-negotiable.
As the CBDT ramps up its efforts, crypto investors are advised to ensure accurate reporting of their transactions to avoid hefty penalties. The evolving regulatory landscape in India suggests that greater oversight and possibly harsher measures could be on the horizon for the cryptocurrency market.
Andrew Lee
