Indian Crypto Traders on Alert as Tax Authorities Crack Down on Evasion
Crypto traders in India are feeling the heat as regulators tighten the screws on tax evasion. Notices are flying—and wallets are sweating.
The Taxman Cometh
Indian authorities are hunting undeclared crypto gains like bulls chasing a red flag. No more flying under the radar—compliance is now the name of the game.
Show Me the Money
With crypto’s pseudonymous nature, traders once thought they could dodge taxes. Turns out, blockchain leaves breadcrumbs—and tax offices love following trails.
A Warning Shot
This isn’t just about penalties. It’s a message: play by the rules, or face the music. Meanwhile, traditional bankers smirk—nothing delights them more than crypto’s regulatory growing pains.
High adoption, high scrutiny
Compared to regulation, crypto adoption has raced ahead in India, with approximately 100 million users and a growing adoption rate of 7.1% of the population. The high market penetration rate has made the government pay more attention to sealing tax loopholes in the industry.
In FY23 and FY24, officials collected 705 crore rupees (approximately $80 million) in reported crypto earnings. But enquiries have found undisclosed earnings of at least 630 crore ($75 million). These results have led to tax review, raids, and seizures all over the country.
To add to this pressure, the Enforcement Directorate has seized 42.8 crore ($4.8 million) in assets of an Indian national who swindled international investors with a fake Coinbase site. The defendant is already serving 10 years in the United States for running a scam amounting to $20 million.
Due to increasing risks and an expanding market, India has started licensing local and foreign exchanges by its Financial Intelligence Unit (FIU). High-profile names such as Binance, Coinbase, KuCoin, and Bybit have been approved to be run under the control of the FIU. The registration enables the Indian authorities to track transactions and collect tax more effectively.
Crypto tax laws remain tough and unchanged
The crypto tax regime in India is still one of the strictest in the world. The framework, introduced in 2022, adds a flat tax of 30% on all gains of VDAs under Section 115BBH. There is also the Tax Deductible at Source (TDS) of 1% that traders pay on all transactions above certain limits.
The framework applies to digital assets, such as cryptocurrencies and NFTs. It also charges an 18% Goods and Services Tax (GST) on service fees levied by exchanges on wallet and trading services.
Despite the industry’s objections, the government has remained adamant about revising these rules. Rather, enforcement agencies have upped surveillance and compliance tools. The CBDT applies systems such as Project Insight and the Non-Filer Monitoring System (NMS) to align blockchain activity and tax reporting.
According to Indian law, failure to claim crypto transactions will lead to a 50% penalty on unpaid taxes. If intentional misreporting is established, the fine can increase to 200%.
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