India’s tax authorities are zeroing in on cryptocurrency tax evaders in a major enforcement drive led by the Central Board of Direct Taxes (CBDT). As part of an intensified compliance campaign, the CBDT has flagged thousands of individuals and entities who failed to declare their income from Virtual Digital Assets (VDAs) for the assessment years 2023–24 and 2024–25. Many skipped Schedule VDA in their income tax returns or incorrectly applied deductions and lower tax rates—violating Section 115BBH of the Income Tax Act, 1961. This section, introduced in the Finance Act, 2022, mandates a flat 30% tax on VDA income without permitting any deductions (except acquisition cost) or loss adjustments.

Using its NUDGE framework—which leverages big data for non-intrusive compliance—the CBDT is matching filed ITRs with TDS data from crypto exchanges, formally called Virtual Asset Service Providers (VASPs). The real-time reconciliation has revealed significant discrepancies, prompting compliance notices to thousands of users urging them to revise or update their tax returns. This is the third such drive in six months, following previous crackdowns on unreported foreign assets and bogus Section 80GGC deductions. As the Indian government tightens its grip on the crypto economy, individuals transacting in digital assets are being urged to ensure full tax transparency to avoid penalties or prosecution.