India is making significant strides in its efforts to bring the burgeoning crypto economy under its tax net, with recent disclosures highlighting both substantial undeclared income and the government's rigorous enforcement measures. These efforts are part of a broader strategy to enhance transparency and ensure greater tax compliance in the digital asset sector.
Enforcing Compliance and Uncovering Discrepancies
The Indian tax authorities have made a considerable breakthrough, identifying nearly $72 million (630 crore rupees) in undisclosed income stemming from Virtual Digital Asset (VDA) transactions. This revelation, announced by Minister of State for Finance Pankaj Chaudhary, comes alongside the collection of over $80 million (705 crore rupees) in voluntary crypto tax payments over the past two financial years. To tackle evasion, authorities have issued over 44,000 notices to individuals and organizations, leveraging advanced data analysis tools such as the Non-Filer Monitoring System (NMS) and Project Insight. These systems meticulously cross-reference VDA transaction data with taxpayer filings, aiming to foster greater transparency and ensure a robust culture of tax compliance within the digital asset sector.
Industry Concerns and a Call for Balanced Policies
Despite the government's success in tax collection, industry leaders express concerns that the current stringent tax regime might be counterproductive. Figures like CoinDCX CEO Sumit Gupta argue that the combination of a 30% capital gains tax and a 1% tax deducted at source (TDS) on every trade has inadvertently driven millions of Indian crypto traders to offshore platforms. This exodus not only weakens local market participation but also diminishes India’s potential tax revenue. Gupta suggests that a more balanced and competitive domestic tax environment could significantly boost annual crypto tax intake, potentially exceeding ₹5,000 crore, ultimately encouraging long-term investment and positioning India as a global leader in digital finance.
