The Indian government has announced significant changes in crypto taxation, including severe penalties for undeclared gains.
New Tax Measures
Starting February 1, 2025, India's government will impose penalties up to 70% on undeclared cryptocurrency profits, with a lookback period of 48 months. These measures were introduced under the amendment to Section 158B of the Income Tax Act by Finance Minister Nirmala Sitharaman in the Union Budget 2025. Crypto assets are now classified as virtual digital assets, treated similarly to cash, jewelry, and gold. Exchanges and financial institutions are required to report all transactions to tax authorities, increasing regulatory scrutiny on the industry.
What This Means for Crypto Holders
The implementation of retroactive taxation means that: - Unreported gains from the past four years will face a 70% penalty, plus additional interest and fines. - Crypto transactions must be disclosed under Section 285BAA of the Income Tax Act. - Authorities will conduct block assessments to identify undeclared crypto income. - The new tax regime applies from February 2025, covering gains made in the last 48 months.
India’s Overall Crypto Crackdown
The Indian government is tightening its grip on the crypto industry, as evidenced by a series of measures in 2024. In December, India's Ministry of Finance identified ₹824 crore ($97 million) in unpaid GST from several crypto exchanges. Earlier, in August 2024, Binance received a ₹722 crore ($85 million) tax demand. These actions indicate a broader regulatory effort. Similar steps are being taken in other countries, such as the US, where new reporting rules for digital assets have been introduced. However, India's strict approach involves direct penalties on unreported gains. India's Economic Affairs Secretary Ajay Seth has hinted at possible revisions in the country's stance on crypto, yet the immediate future points towards greater financial oversight.
India is ramping up financial oversight on crypto assets with new tax measures and penalties, reflecting an overall tightening of regulations in this sector.
