The government's scrutiny of India's crypto ecosystem has intensified, with over 44,000 communications sent to taxpayers who failed to disclose their virtual digital asset (VDA) transactions in their ITRs. Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha on Monday that the alerts were issued under the CBDT's NUDGE (Non-Intrusive Usage of Data to Guide and Enable) campaign.
According to Chaudhary, tax authorities are leveraging data analytics tools, Project Insight, and internal databases to match reported VDA activity with actual transactions. The analysis also includes TDS returns filed by Virtual Asset Service Providers (VASPs) to identify mismatches or non-compliance. "These 44,057 communications target taxpayers who invested or traded in VDAs but did not report them in Schedule VDA of their ITRs," he stated.
ED Crackdown: Rs 4,189.89 Crore Attached
Parallel to the tax department's efforts, the Enforcement Directorate (ED) has intensified investigations under the Prevention of Money Laundering Act (PMLA). The agency has attached, seized, or frozen proceeds of crime worth Rs 4,189.89 crore in crypto-related cases. Investigations have so far resulted in:
- 29 arrests
- 22 prosecution complaints filed
- One accused declared a Fugitive Economic Offender
TDS on Crypto Transactions Doubles
Government data revealed a sharp rise in Tax Deducted at Source (TDS) collected on crypto transactions.
- Rs 221 crore in 2022-23
- Rs 511+ crore in 2024-25
Among states, Maharashtra saw collections jump from Rs 142 crore to Rs 293 crore, while Karnataka recorded the steepest rise, climbing from Rs 39 crore to around Rs 134 crore.
Under the Finance Act 2022, a 1% TDS applies to all VDA transfers-including those executed through offshore platforms. Chaudhary highlighted that several offshore crypto exchanges serving Indian users are not complying with TDS rules.
Tax Raids Reveal Massive Undisclosed Income
Survey and enforcement actions against three crypto exchanges detected:
- Rs 39.8 crore TDS non-compliance
- Rs 125.79 crore undisclosed income
Further search and seizure operations uncovered undisclosed VDA-linked income worth Rs 888.82 crore across multiple entities.
Need for Global Regulatory Coordination
Calling crypto assets "inherently borderless", Chaudhary emphasised that any effective regulatory framework must be built on international collaboration. Global efforts on consistent tax standards, risk evaluation, and common classification frameworks are crucial to preventing regulatory arbitrage, he added.
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