CBDT Flags Widespread Crypto Tax Evasion; Thousands Receive Compliance Notices
According to sources, the CBDT is actively investigating individuals and entities that have failed to disclose crypto income or have underreported it.
The Central Board of Direct Taxes (CBDT) has flagged significant tax evasion and laundering of unaccounted income through cryptocurrency transactions by high-risk individuals and entities. The crackdown follows data-driven analysis revealing widespread violations in the reporting of Virtual Digital Asset (VDA) income.
According to sources, the CBDT is actively investigating individuals and entities that have failed to disclose crypto income or have underreported it in violation of provisions under the Income Tax Act, 1961. These include cases where taxpayers either skipped filing Schedule VDA in their income tax returns in AY 2023-24 and AY 2024-25 or incorrectly claimed deductions or lower tax rates.
Under Section 115BBH, introduced via the Finance Act, 2022, income from the transfer of VDAs is taxed at a flat rate of 30%, with no allowance for deductions other than the cost of acquisition. Importantly, losses from VDA trading or investment cannot be set off against any other income or carried forward to future years.
CBDT officials are currently cross-verifying the ITRs filed by taxpayers with TDS data submitted by Virtual Asset Service Providers (VASPs) — commonly known as crypto exchanges. This matching process has already identified thousands of discrepancies.
In response, the department has sent emails to thousands of individuals, urging them to review and update their filings, particularly with respect to undeclared income from crypto transactions.
This enforcement drive is part of CBDT’s broader compliance initiative under its NUDGE framework (Non-Intrusive Usage of Data to Guide and Enable), which aligns with the “Trust Taxpayers First” approach. This marks the third NUDGE campaign in six months, following earlier efforts focused on foreign asset disclosures and withdrawal of bogus deductions under Section 80GGC.
The latest campaign signals a growing regulatory focus on virtual assets and a clear warning to investors and traders to ensure full tax compliance.
