India finds $72 million in hidden crypto income as tax compliance tightens

India’s tax authorities have uncovered nearly 630 crore rupees (approximately $72 million) in undisclosed income from crypto-related transactions, according to an Aug. 5 disclosure by Pankaj Chaudhary, the Minister of State for Finance.

The minister, citing figures from the Central Board of Direct Taxes (CBDT), stated that the numbers reflect discrepancies in tax filings tied to Virtual Digital Asset (VDA) trades.

Alongside this revelation, the minister also confirmed that the government has collected 705 crore rupees (more than $80 million) in taxes on crypto gains over the past two financial years.

These revenues come from users who voluntarily reported income from digital assets such as Bitcoin under the tax regime introduced in April 2022.

Tackling tax evasion

To address the significant amount of undeclared tax income, Indian authorities have issued over 44,000 notices to individuals and organizations that failed to report crypto-related earnings.

The authorities stated that this enforcement is part of a broader strategy to bring transparency to the digital asset economy and ensure a stronger culture of tax compliance.

Chaudhary further revealed that CBDT has implemented several data analysis tools, including the Non-Filer Monitoring System (NMS) and Project Insight, to improve reporting accuracy.

These systems cross-reference VDA transaction data with taxpayer disclosures, such as Income Tax Returns (ITRs) and TDS returns filed by Virtual Asset Service Providers (VASPs), allowing authorities to spot discrepancies and take appropriate action.

However, some industry leaders argue that the current tax structure may be counterproductive.

CoinDCX CEO Sumit Gupta pointed out that the combination of a 30% capital gains tax and a 1% tax deducted at source on every trade has driven millions of Indian traders toward offshore platforms, where oversight is limited. This shift not only weakens local participation but also erodes potential revenue.

Gupta suggests that India could substantially boost its annual crypto tax intake, potentially exceeding ₹5,000 crore, by making the domestic trading environment more competitive. He maintains that a more balanced policy would encourage long-term investment and reduce the appeal of offshore exchanges, paving the way for India to become a global hub for digital finance.