The government has collected Rs 437.43 crore in income tax from cryptocurrencies and other Virtual Digital Asset (VDA) transactions in FY24, marking a significant 62% jump from Rs 269.09 crore in FY23, the first full year since the VDA tax regime was introduced under Section 115BBH of the Income Tax Act.
The sharp increase reflects growing taxpayer compliance following the introduction of a flat 30% tax on crypto profits from April 1, 2022. Notably, the regime also disallows any offsetting of VDA-related losses against other income or carry-forward provisions.
Additionally, a 1% Tax Deducted at Source (TDS) on crypto transactions came into effect from July 1, 2022, aimed at tracking the flow of funds in the unregulated digital asset space.
No Estimate Yet on Revenue Loss from Under-Reporting
Despite the rising collections, the government has not quantified potential revenue losses due to under-reporting or non-disclosure of crypto income. In a written reply to the Lok Sabha during the Monsoon Session, Minister of State for Finance Pankaj Chaudhary said that no formal estimates have been made so far.
AI & Data Analytics Power Crypto Tax Surveillance
To strengthen compliance, the Income Tax Department is relying heavily on advanced data analytics tools, including the Non-Filer Monitoring System (NMS), Project Insight and proprietary databases. These tools match reported income with actual VDA transactions recorded by exchanges and other digital platforms.
"The Income Tax Department correlates available information on VDA transactions with the income tax returns filed by taxpayers," the Minister said, stressing the government's intent to tighten enforcement through tech-driven means.
Taxpayers Alerted for Discrepancies Exceeding Rs 1 Lakh
Even though no real-time reconciliation system currently exists between returns filed by crypto exchanges and individual taxpayers, the department is monitoring substantial mismatches.
Under the CBDT's NUDGE (Non-Intrusive use of Data to Guide and Enable) campaign, taxpayers with discrepancies exceeding Rs 1 lakh - despite TDS being deducted by Virtual Asset Service Providers (VASPs) - have been issued alerts encouraging voluntary compliance.
Govt Training Tax Officials in Blockchain & Digital Forensics
As part of broader enforcement reforms, the Income Tax Department is conducting nationwide training programmes for tax officials in digital forensics and blockchain analytics. Specialized sessions, including 'Chintan Shivirs' and workshops, are being held in collaboration with institutions like the National Forensic Science University (NFSU), Goa.
These initiatives are expected to enhance the government's capacity to trace and investigate crypto transactions effectively.
FY25 Data Awaited as ITR Deadline Nears
Tax collection figures for FY25 are not yet available, as the deadline for filing income tax returns is still pending. However, with stricter monitoring and rising awareness among crypto investors, collections are expected to rise further this year.
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