CBDT Cracks Down on Undisclosed Crypto Income
India’s tax authorities are intensifying their efforts to ensure compliance with cryptocurrency income declarations. The Central Board of Direct Taxes (CBDT) has launched a significant crackdown on individuals and entities suspected of evading taxes and laundering money through undisclosed or underreported crypto transactions.
The CBDT’s data-driven investigation has flagged thousands of taxpayers who failed to declare their Virtual Digital Asset (VDA) income for the assessment years 2023-24 and 2024-25. Many of these individuals either omitted the mandatory Schedule VDA in their income tax returns or wrongly claimed deductions and preferential tax rates, violating provisions of the Income Tax Act, 1961.
A key focus of this scrutiny is Section 115BBH, introduced in the Finance Act, 2022. This section imposes a flat 30% tax on VDA income, allowing no deductions beyond the cost of acquisition and prohibiting the offsetting of VDA losses against other income or carrying them forward.
CBDT officials are actively matching Income Tax Returns (ITRs) with Tax Deducted at Source (TDS) data submitted by crypto exchanges, also known as Virtual Asset Service Providers (VASPs). This real-time reconciliation has revealed numerous mismatches, prompting the tax department to send compliance emails to thousands of users, urging them to revise and update their returns.
This enforcement drive is part of the CBDT’s NUDGE framework (Non-Intrusive Usage of Data to Guide and Enable), which aims to promote voluntary compliance through data insights. It’s the third such campaign in six months, following earlier initiatives targeting undeclared foreign assets and bogus deductions.
If you’ve been involved in cryptocurrency transactions, it’s crucial to ensure your tax filings are accurate and complete to avoid potential penalties.