Cryptocurrency traders in India may face significant tax penalties on previously undisclosed profits under new amendments to the country’s tax laws.
Cryptocurrencies will be included under Section 158B of the Income Tax Act, which reports undisclosed income, according to Indian Finance Minister Nirmala Sitharaman’s Union Budget 2025 announcement.
The amendment allows cryptocurrency gains to be subject to block assessments if not reported, placing them under the same tax treatment as traditional assets like money, jewelry and bullion.
Crypto will fall under the definition of Virtual Digital Assets (VDAs), according to the new amendment, which states:
“Crypto asset has been defined in section 2(47A) of the Act under the existing definition of Virtual Digital Asset[…] A reporting entity, as may be prescribed under section 285BAA of the Act, will be required to furnish information of crypto asset.”
The new crypto tax proposition will be retrospectively applicable from Feb. 1, 2025.
At the end of December 2024, India’s Minister of State for Finance, Pankaj Chaudhary, said the government had found 824 crore Indian rupees ($97 million) in unpaid goods and service taxes (GST) by several crypto exchanges.
The report came a few months after Indian law enforcement agencies demanded 722 crore Indian rupees ($85 million) in unpaid taxes from Binance in August.
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Crypto traders face up to 70% tax penalty on undisclosed crypto gains
As a sign of concern for cryptocurrency holders, Indian authorities may issue a tax penalty of up to 70% on previously undisclosed crypto profits.
This penalty may apply to crypto gains that remained undisclosed for up to 48 months after the relevant tax assessment year, according to the document, that wrote:
“70% of the aggregate of tax and interest payable on additional income disclosed in the updated income tax return [ITR].”
The amendments come two weeks after Bybit exchange suspended its services in India on Jan. 10, citing regulatory pressure as it continues to pursue a full operational license from India’s Financial Intelligence Unit.
Related: Regulation compliance key to India’s crypto future — Bitget COO
Crypto tax laws are gaining prominence worldwide
Crypto tax laws gained increased interest worldwide in June 2024 after the US Internal Revenue Service (IRS) issued a new crypto regulation, which will make US crypto transactions subject to third-party tax reporting requirements for the first time.
Starting in 2025, centralized crypto exchanges (CEXs) and other brokers will start reporting the sales and exchanges of digital assets, including cryptocurrencies.
This decision could push crypto investors to decentralized platforms in a “paradoxical situation” that could make tax revenue harder to track, Anndy Lian, author and intergovernmental blockchain expert, told Cointelegraph.
Showcasing the crypto industry’s backlash, the Blockchain Association filed a lawsuit against the IRS in December 2024, arguing that the rules are unconstitutional because they include decentralized exchanges under the “broker” term, extending data collection requirements to them.
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