The Indian government has uncovered approximately ₹630 crore in unreported income from cryptocurrency and other virtual digital asset (VDA) transactions over the past two financial years, highlighting its intensified efforts to combat tax evasion in the booming crypto sector. Minister of State for Finance Pankaj Chaudhary disclosed the findings in a written reply to the Rajya Sabha on August 5, emphasizing the government’s resolve to enforce tax compliance.
The Central Board of Direct Taxes (CBDT) identified the hidden income through search and seizure operations and surveys conducted in 2022-23 and 2023-24. These actions targeted individuals and entities suspected of concealing earnings from cryptocurrency trading and investments. “Cases of tax evasion linked to investments in cryptocurrency and VDAs have been detected on multiple occasions, with necessary action taken under the Income Tax Act, 1961,” Chaudhary stated.
To detect these discrepancies, the CBDT leveraged advanced data analytics tools, including the Non-Filer Monitoring System (NMS) and Project Insight, alongside internal databases. These systems cross-checked VDA transaction data against taxpayers’ Income Tax Returns (ITRs) and Tax Deducted at Source (TDS) filings from Virtual Asset Service Providers (VASPs), such as crypto exchanges, revealing significant underreporting.
In an effort to promote compliance, the CBDT initiated the Non-Intrusive Usage of Data to Guide and Enable (NUDGE) campaign, contacting 44,057 taxpayers via emails and messages. These individuals had engaged in VDA transactions but failed to report them in the Schedule VDA section of their ITRs. The campaign seeks to educate taxpayers about their obligations under India’s crypto tax framework, which imposes a 30% tax on gains, a 1% TDS on transactions, and, since July 2025, an 18% Goods and Services Tax (GST) on crypto exchange services.
The crackdown is part of a broader effort to address unreported income. In the 2024-25 fiscal year, the Income Tax Department conducted 465 surveys, uncovering ₹30,444 crore in undisclosed income across all asset classes, with assets worth ₹2,504 crore seized from 1,437 searched groups. The focus on cryptocurrencies reflects their growing popularity in India, where over 90 million people hold digital assets, making the country a global leader in crypto adoption.
The 2025 Union Budget, presented by Finance Minister Nirmala Sitharaman, strengthened oversight by including VDAs in the definition of undisclosed income under Section 158B of the Income Tax Act. Effective February 1, 2025, unreported crypto gains discovered during tax raids can face taxes of up to 60%, plus interest and potential prosecution. This aligns cryptocurrencies with traditional assets like cash and gold, allowing authorities to assess unreported income for up to six prior years.
The regulatory tightening has raised the stakes for crypto investors. Non-compliance could also attract scrutiny under the Prevention of Money Laundering Act (PMLA), particularly for transactions involving overseas assets. Major exchanges like Binance, OKX, and Bybit now face mandatory GST registration and reporting requirements, increasing compliance costs for users. Meanwhile, the Finance Ministry is developing a policy paper on VDAs, suggesting further regulatory clarity may be on the horizon.
Despite heavy taxation, India’s crypto market remains robust, driven by widespread retail participation. However, with authorities using advanced technology and new legal provisions to track digital wealth, concealing crypto income is becoming increasingly challenging. For India’s millions of crypto investors, compliance is now both a legal and financial imperative.
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