India’s Central Board of Direct Taxes (CBDT) has launched a large-scale investigation regarding individuals and entities failing to report income from Virtual Digital Assets (VDAs), including cryptocurrencies.
Reasons Behind CBDT's Investigation
The CBDT identified significant non-compliance related to crypto income and sent notices via email, urging recipients to update their Income Tax Returns (ITRs). A senior CBDT official confirmed: "The department has recently sent emails to thousands of defaulting persons to review their ITR and update it if any income on account of VDA transactions has not been properly declared." Undeclared income violates provisions under the Income Tax Act, 1961 and is currently under close scrutiny.
Actions for Crypto Investors
If you’ve received a notice or believe your crypto income is not properly declared, it is recommended to take the following steps: 1. Review your past ITRs for any undeclared crypto gains 2. Gather records of all VDA transactions 3. File an updated return using ITR-U under Section 139(8A) 4. Declare crypto income separately from other capital gains for clarity. Timely compliance can help avoid penalties and formal investigations.
Future Steps by CBDT
The CBDT has clearly stated that this is a final reminder. Those who fail to respond to the notice may be subjected to verification or in-depth scrutiny. CBDT warned: "Those who fail to respond to the nudge may be picked for verification or scrutiny." This action signifies a stricter enforcement environment for crypto users in India. As virtual assets grow in popularity, the tax department is stepping up efforts to ensure transparency and legal compliance.
The CBDT investigation highlights the importance of tax compliance for crypto investors in India. With strict measures implemented by tax authorities, investors must be vigilant regarding their reporting obligations for income from virtual digital assets.