The Central Board of Direct Taxes (CBDT) has intensified its scrutiny of cryptocurrency-linked tax evasion and income laundering, with a new data-driven initiative targeting individuals and entities engaged in Virtual Digital Asset (VDA) transactions. Sources from the Income Tax Department confirmed that thousands of emails have been issued to suspected defaulters, urging them to reassess their income tax returns (ITRs) and report any undisclosed crypto-related income.
According to officials, the CBDT has identified several high-risk individuals and entities who failed to comply with the provisions of the Income-tax Act, 1961, particularly those related to disclosure of VDA transactions. The crackdown follows the introduction of Section 115BBH under the Finance Act, 2022, which imposes a flat 30% tax (plus applicable surcharge and cess) on income from the transfer of virtual digital assets like cryptocurrencies and NFTs.
Under this provision, no deductions, except the cost of acquisition permitted and losses from VDA trading cannot be set off against other income or carried forward to future years.
Data Analytics Reveal Alarming Trends
Departmental data analytics flagged widespread non-compliance, with numerous taxpayers either failing to file Schedule VDA in their ITRs or offering VDA income at concessional rates, even claiming indexation benefits-none of which are allowed under current tax laws. The income tax authorities are now verifying these ITRs against TDS filings submitted by Virtual Asset Service Providers (VASPs), commonly known as cryptocurrency exchanges.
Discrepancies between taxpayer disclosures and data submitted by VASPs could trigger detailed scrutiny, officials warned.
CBDT's Third NUDGE Campaign Launched
This enforcement initiative is part of CBDT's broader NUDGE (Non-intrusive Usage of Data to Guide and Enable) campaign-an outreach model that aims to guide taxpayers toward voluntary compliance using data intelligence, rather than aggressive enforcement.
This marks the third NUDGE campaign in the last six months. Previous drives focused on foreign asset disclosures and withdrawal of fraudulent deductions claimed under Section 80GGC (political contributions).
As per the TRUST (Taxpayers' Rights & Unbiased Support and Transparency) Taxpayers FIRST philosophy, CBDT aims to create a balance between voluntary compliance and enforcement through strategic data nudges, helping ensure a fair and transparent tax system.
Crypto Investors on the Radar
Tax experts advise cryptocurrency investors to carefully review their ITRs and ensure accurate disclosures of VDA gains in line with Section 115BBH. With the government's growing focus on transparency and digital trail-matching, non-compliance could lead to tax demands, penalties, and possible prosecution in serious cases.
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