The Indian government has announced strict measures to control undeclared cryptocurrency earnings. These changes will come into effect in February 2025, imposing significant fines.
What This Means for Crypto Holders
For cryptocurrency holders, this signifies the introduction of retrospective taxation. Unreported gains from the past four years will be subject to penalties of up to 70%, plus additional interest and fines. Crypto transactions must now be reported under Section 285BAA of the Income Tax Act. Authorities will conduct block assessments to identify undeclared crypto income.
Crypto Taxation in India
The government is tightening its grip on cryptocurrency earnings by implementing retrospective taxation. This is part of the amendment to Section 158B of the Income Tax Act, introduced in the Union Budget 2025 by Finance Minister Nirmala Sitharaman. Crypto assets are now classified as Virtual Digital Assets (VDAs), falling under the same tax treatment as cash, jewelry, and gold. The amendment ensures that crypto exchanges and financial institutions report all transactions to tax authorities, increasing regulatory oversight on the industry.
Global Approach to Crypto Regulation
The Indian government continues its tough stance on crypto taxation, following a series of enforcement actions in 2024. In December, Minister of State for Finance Pankaj Chaudhary revealed that tax authorities had uncovered 824 crore rupees ($97 million) in unpaid Goods and Services Taxes from multiple crypto exchanges. These actions indicate a larger effort to regulate and monitor crypto-related financial activities. Globally, practices are also shifting towards stricter regulation. In June 2024, the U.S. IRS introduced new reporting rules for digital assets, which met substantial opposition in some circles, leading to lawsuits against the IRS. India, however, has taken an even stricter approach by imposing direct penalties on unreported gains.
The Indian crypto market faces increasing regulatory pressure as the government enforces stricter tax policies. Authorities do not rule out the possibility of revising the country's stance on cryptocurrency.
