The Indian government has announced major tax measures on undeclared cryptocurrency earnings. Starting February 1, 2025, such earnings will face a penalty of up to 70% with a lookback period of 48 months.
What This Means for Crypto Holders
The new measures entail strict control over earnings from crypto assets. Crypto holders should be aware that:
* Heavy penalties: Unreported gains from the past four years will be subject to a 70% penalty, plus additional interest and fines. * Mandatory reporting: Crypto transactions must be disclosed under Section 285BAA of the Income Tax Act. * Increased oversight: Authorities will conduct block assessments to identify undeclared crypto income. * Retroactive enforcement: The new tax regime applies from February 1, 2025, covering gains made in the last 48 months.
India's Crypto Industry Under Tax Pressure
The Indian government's tough stance on crypto taxation follows a series of actions taken in 2024. In December, India's Minister of State for Finance Pankaj Chaudhary revealed that ₹824 crore ($97 million) in unpaid Goods and Services Taxes (GST) were uncovered from multiple crypto exchanges. In August 2024, Binance received a ₹722 crore ($85 million) tax demand from Indian authorities. These actions indicate a larger effort to regulate and oversee crypto-related financial activities.
Global Crypto Regulation
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, the U.S. tax changes have faced strong opposition, with some crypto advocacy groups suing the IRS, arguing that the rules violate constitutional rights. 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. While future revisions are hinted, the immediate outlook points towards tighter financial scrutiny.
