The Indian government has announced significant tax pressure on cryptocurrency earnings starting February 2025. New legislation imposes penalties up to 70% for undeclared gains.
Impact on Crypto Holders
The Indian government is implementing retrospective taxation on cryptocurrency earnings, which includes: * Heavy penalties of up to 70% for undeclared gains from the past four years, plus additional interest and fines. * Mandatory disclosure of crypto transactions under Section 285BAA of the Income Tax Act. * Increased oversight: Authorities will conduct block assessments to identify undeclared crypto income. * The new tax regime applies to gains made in the last 48 months, starting February 2025.
India's Tough Stance on Crypto Taxes
The Indian government continues its tough stance on cryptocurrency taxation following a series of enforcement actions in 2024. In December, India's Minister of State for Finance, Pankaj Chaudhary, reported that ₹824 crore ($97 million) in unpaid Goods and Services Taxes (GST) had been uncovered from multiple crypto exchanges. Earlier, in August 2024, Binance received a ₹722 crore ($85 million) tax demand from Indian authorities, indicating increased regulatory oversight on crypto-related financial activities.
Global Trend of Tightening Norms
India is not alone in tightening crypto regulations. In June 2024, the U.S. Internal Revenue Service (IRS) introduced new reporting rules for digital assets, requiring third-party platforms to report transactions for tax compliance. However, these changes have faced strong opposition from crypto advocacy groups in the U.S., who have sued the IRS, arguing that the rules violate constitutional rights. Nonetheless, India has taken an even stricter approach by directly penalizing unreported gains. The Indian crypto market faces increasing regulatory pressure as the government enforces stricter tax policies.
The Indian government is set to tighten control of the cryptocurrency sector through new tax measures starting in 2025. Despite hints at possible revisions to its stance on crypto assets from India's economic affairs secretary Ajay Seth, tighter financial scrutiny is expected in the near future.
