The Indian government has announced major tax enforcement on undeclared cryptocurrency profits.
New Cryptocurrency Tax Legislation
Under the amendment to Section 158B of the Income Tax Act introduced in the Union Budget 2025 by Finance Minister Nirmala Sitharaman, all undeclared crypto gains from February 1, 2025, will face penalties of up to 70%. Crypto assets are now categorized as Virtual Digital Assets (VDAs), equating them with cash, jewelry, and gold. The amendment mandates that crypto exchanges and financial institutions report transactions to tax authorities.
Impact on Cryptocurrency Holders
Crypto investors face significant changes:
- Heavy penalties: Unreported gains from the last four years will face a 70% penalty, plus interest and additional fines. - Mandatory reporting: All 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 the past 48 months gains.
India’s Regulatory Efforts in Cryptocurrency
The Indian government's tough stance on crypto taxation follows a series of enforcement measures in 2024. In December, India’s Minister of State for Finance Pankaj Chaudhary revealed ₹824 crore ($97 million) in unpaid Goods and Services Taxes (GST) from multiple crypto exchanges. Earlier, in August 2024, Binance received a ₹722 crore ($85 million) tax demand. These actions underscore efforts to regulate and monitor crypto-related financial activities. India has taken a firm approach to cryptocurrencies by imposing direct penalties for undeclared gains, signaling an increase in financial scrutiny.
The Indian crypto market faces increasing regulatory pressure as the government enforces stricter tax policies. While India's economic affairs secretary Ajay Seth has hinted at possible revisions to the country's stance on crypto, the immediate future indicates tighter financial scrutiny.
