The Indian government is taking significant steps to combat tax evasion in the cryptocurrency market, having issued over 44,000 notifications to individuals who did not report their virtual digital asset (VDA) activities in their tax returns.
Crackdown on Non-Compliance
During a recent session in the Rajya Sabha, Pankaj Chaudhary, the Minister of State for Finance, disclosed that the Central Board of Direct Taxes (CBDT) has ramped up its enforcement actions against non-compliant crypto participants. This involves reassessment notices, thorough investigations, and search-and-seizure operations as defined under the Income Tax Act, 1961.
The CBDT aims to foster voluntary compliance through its proactive NUDGE campaign (Non-Intrusive Usage of Data to Guide and Enable). This initiative has led to the issuance of 44,057 communications targeting individuals engaged in cryptocurrency without filing accurate reports.
In the 2022-23 financial year, the Indian government imposed taxes on profits from digital assets. Taxpayers have reported around ₹705 crore (approximately $80.6 million) in cryptocurrency income for the fiscal years 2022-23 and 2023-24 combined.
Despite this, enforcement measures uncovered an additional ₹630 crore ($72 million) in income that had previously gone unreported. It’s interesting to note that concerns about tax evasion extend beyond individuals to include various crypto exchanges.
The CBDT uses advanced data analytics tools, such as the Non-Filer Monitoring System (NFMS), Project Insight, and its internal databases, to enhance its monitoring capabilities of crypto transactions. This system allows for effective cross-referencing of tax filings with actual business transactions reported by Virtual Asset Service Providers (VASPs). The report states:
The tools assist in identifying inconsistencies between declared information in tax submissions and actual trading activities from VASPs, prompting follow-up actions to ensure full compliance and fiscal recovery.
Challenges in the Indian Crypto Landscape
While India is a leading nation in cryptocurrency adoption, its tax and regulatory framework has generated significant debate. The high tax rate of 30% on crypto profits, combined with a 1% Tax Deducted at Source (TDS) on each transaction, has discouraged many retail investors.
Consequently, several cryptocurrency exchanges in India report falling trading volumes, with some having to lay off staff or close operations altogether. Earlier this year, the crypto firm Bybit announced a temporary suspension of its services in India due to a lack of clear regulations.
In stark contrast, neighboring Pakistan appears to embrace digital asset initiatives. Reports indicate that the country plans to utilize excess energy resources to mine Bitcoin more efficiently.
Meanwhile, the UAE continues to enhance its status as a global hub for crypto enterprises. In a recent move, the nation eliminated Value Added Tax on cryptocurrency exchanges and transactions, driving more business to its digital marketplace.
Despite these hurdles, there are emerging indicators that India is reconsidering its stance on cryptocurrencies. In July 2025, Pradeep Bhandari, a spokesperson for the Bharatiya Janata Party (BJP), suggested the government investigate the possibility of establishing a national Bitcoin reserve, hinting at an interest in integrating crypto into the mainstream financial landscape.
Moreover, Coinbase, the largest cryptocurrency exchange in the United States, is set to make a return to the Indian market later this year, suggesting global confidence in India’s long-term prospects in the digital currency sector, despite short-term challenges. As of now, Bitcoin is trading at $116,720, reflecting a 1.2% rise over the last 24 hours.
