Crypto Tax India Crackdown: CBDT Sends Notices to Thousands for Undeclared Income

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India’s Central Board of Direct Taxes (CBDT) has initiated a large-scale investigation into individuals and entities who failed to report income from Virtual Digital Assets (VDAs), including cryptocurrencies.

What Happened?

The CBDT has identified widespread non-compliance related to crypto income and has sent notices via email, asking recipients to update their Income Tax Returns (ITRs).

“The department has recently sent emails to thousands of defaulting persons to review their ITR and update it if any income on account of VDA (Virtual Digital Asset) transactions has not been properly declared,” a senior CBDT official confirmed.

The undeclared income violates provisions under the Income Tax Act, 1961 and is now under close scrutiny.

Why CBDT Launched This Probe

This enforcement action is part of CBDT’s NUDGE initiative (Non-Intrusive Usage of Data to Guide and Enable) under Section 80GGC. The focus is to detect tax evasion and money laundering in crypto activities.

Key triggers for the crackdown include:

• Large crypto trades not matched with income disclosures
  
• Use of undisclosed offshore wallets
  
• Crypto profits converted into cash with no tax reporting
  
• Lack of foreign asset declaration by traders
  

This action aligns with the Indian government’s efforts to bring transparency to the digital asset ecosystem and combat financial crimes involving crypto.

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What Crypto Investors Need to Do

If you’ve received a notice or believe your crypto income is not properly declared, take the following steps:

1. Review your past ITRs for any undeclared crypto gains
   
2. Gather records of all VDA transactions
   
3. File an updated return using ITR-U under Section 139(8A)
   
4. Declare crypto income separately from other capital gains for clarity
   

Timely compliance can help avoid penalties and formal investigations.

What’s Next?

The CBDT has made it clear that this is a final reminder. Those who fail to respond to the notice may be subjected to verification or in-depth scrutiny.

“Those who fail to respond to the nudge may be picked for verification or scrutiny,” CBDT warned.

This action signals a stricter enforcement environment for crypto users in India. As virtual assets grow in popularity, the tax department is stepping up efforts to ensure transparency and legal compliance.

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The CBDT launched a probe into crypto income to combat tax evasion and money laundering, identifying widespread non-compliance where large crypto trades didn’t match income disclosures.

How should crypto income be declared in India’s ITR?

Crypto income should be declared separately from other capital gains in your ITR, typically using the dedicated Schedule VDA, and potentially an ITR-U if updating past returns.

What is India’s crypto tax in 2025?

India imposes a flat 30% tax on crypto gains and a 1% TDS on transfers over ₹10,000, with no loss set-off.