India Deploys AI to Tighten Crypto Tax Compliance Amid Regulatory Shifts

India is leveraging artificial intelligence and data analytics to monitor cryptocurrency transactions, resulting in a significant rise in tax collections. This underscores both improved compliance and growing mainstream acceptance of digital assets. The decentralized nature of cryptocurrencies poses unique challenges, but India's AI infrastructure is proving effective in tracking these transactions.

Regulatory ambiguity persists, with the Reserve Bank of India refusing to recognize cryptocurrencies as legal tender due to concerns over money laundering and terrorism financing. Nevertheless, the government has implemented Section 194S, imposing a 1% Tax Deducted at Source (TDS) on crypto transactions. This measure enables systematic oversight of trading activities, laying the groundwork for more sophisticated monitoring.

The MOVE reflects a balancing act: fostering innovation while mitigating risks. As AI-driven enforcement ramps up, investors and market participants must navigate an evolving compliance landscape.