Govt collected Rs 437 crore as income tax from crypto in FY24, up 63% from FY23

While India at present does not have any law regulating crypto, the government introduced a flat 30 per cent tax on profit generated through the sale of VDAs starting April 2022, with losses made on the sale of these assets not permitted to be set-off against any other income or be carried forward. Later, starting July 2022, a 1 per cent tax deducted at source (TDS) on cryptocurrency transactions came into effect.

“The Government is utilising data analytics tools to trace and detect tax evasion from VDA related transactions. The analysis includes the use of Non-Filer Monitoring System (NMS), Project Insight and internal databases of the Income Tax Department, to correlate available information on VDA transactions with the transactions disclosed in the return of income by the taxpayer,” Chaudhary further said. He added that while VDA transactions filed in income tax returns were not being matched in real-time with information filed by Virtual Asset Service Providers (VASPs), the TDS returns of these service providers and income tax returns filed by taxpayers were being analysed to identify any discrepancies in reporting of crypto transactions.

“Central Board of Direct Taxes has initiated NUDGE (Non-Intrusive use of Data to Guide and Enable) campaign to identify such discrepancies for further action. Under NUDGE campaign suitable communications, to review and update their income tax returns, were issued to all taxpayers who did not report VDA related transactions in their income tax returns, despite tax being deducted at source for such transactions by VASPs, where the quantum of such discrepancy was more than Rs 1 lakh,” Chaudhary said.

The Indian Express had reported last month, quoting sources, that the income tax department is investigating tax evasion and laundering of unaccounted income by high-risk persons through investments in VDAs, with analysis of crypto transaction data showing “significant violations” of income tax rules. In his response in the Lok Sabha on Monday, the Minister of State for Finance said the government had not made any estimate regarding the projected revenue loss due to under-reporting or misreporting of income from VDA or crypto transactions.

The information from the finance ministry on the income tax collected from crypto comes a day after CoinDCX, one of India’s leading cryptocurrency exchanges, disclosed that it had suffered a loss of around $44 million, roughly Rs 379 crore, due to a security breach. Meanwhile, another leading Indian crypto firm WazirX was hit by a cyberattack last year which saw hackers allegedly steal more than $230 million of users’ holdings.

According to a December 2024 paper by New Delhi-based tech policy think-tank Esya Centre, analysis of relevant transaction data from December 2023 to October 2024 showed that Indians traded more than Rs 2.63 lakh crore on offshore crypto platforms, which corresponds to Rs 2,634 crore in TDS owed by offshore platforms. According to the think-tank, the total TDS that has not been collected from offshore exchanges since July 2022 possibly exceeds Rs 6,000 crore. Over the next five years, the think-tank projected, total crypto trading by Indians on offshore platforms could lead to more than Rs 17,000 crore of uncollected TDS.