India’s apex tax authority, the Central Board of Direct Taxes (CBDT), initiated a large-scale compliance campaign targeting crypto investors and traders. Thousands of notices were reportedly issued to individuals and entities suspected of not disclosing income from virtual digital assets (VDAs) in their tax returns. This drive is understood to have been a part of CBDT’s ongoing NUDGE initiative, a non-intrusive strategy aimed at encouraging voluntary compliance while reinforcing the government’s push for greater clarity, oversight, and accountability in India’s rapidly expanding digital asset ecosystem.
What’s Triggered the Crackdown?
- Non-reporting of Crypto Income: The CBDT zeroed in on individuals and entities suspected of failing to disclose earnings from VDAs for the assessment years 2023-24 and 2024-25. Many of these cases involve taxpayers who avoided filing Schedule VDA altogether.
- Misuse of Deductions and Low Tax Rates: Authorities flagged instances where taxpayers inaccurately claimed deductions or applied concessional tax rates, violating the stipulations under the Income Tax Act, 1961.
- Strict Tax Rules Under Section 115BBH: The section, introduced under the Finance Act, 2022, mandates a strict 30% tax on all crypto gains, without any set-offs or carryforwards of losses. Many filings were found to be non-compliant with this, prompting further scrutiny.
- Cross-verification with Exchanges’ Data: The tax department is believed to have compared individual filings with transaction data submitted by crypto platforms. This side-by-side review has revealed several inconsistencies, raising concerns about hidden or understated income.
- Mass Email Campaign to Non-Compliant Users: As part of its outreach, CBDT sent out alerts urging people to revisit their filings if crypto earnings were omitted or misrepresented.
- Part of the NUDGE Compliance Series: Reportedly, this move emphasized on the third phase of CBDT’s NUDGE drive in 6 months, following earlier crackdowns on undisclosed foreign assets and improper Section 80GGC claims, all part of its “Trust Taxpayers First” strategy to promote voluntary compliance.
Conclusion
The CBDT’s latest compliance initiative marks a significant step toward building a more transparent and well-regulated crypto environment in India. By actively matching taxpayer filings with data from exchanges, the government is signaling its intent to bring virtual digital assets into the fold of mainstream financial oversight. Rather than being punitive, this move aligns with the broader “Trust Taxpayers First” philosophy, encouraging honest disclosures through gentle nudges and data-backed guidance. For crypto investors and traders, it’s an opportunity to revisit past filings, understand evolving tax expectations, and align with the legal framework under Section 115BBH. As the digital asset market continues to grow, such proactive steps will help foster greater confidence, legitimacy, and long-term stability within India’s crypto ecosystem.
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Disclaimer:
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