India Cracks Down on Crypto Tax Evasion

India’s tax authority is intensifying its efforts to uncover unreported cryptocurrency income. Thousands of taxpayers are receiving notices for discrepancies between their reported income and data from cryptocurrency exchanges (VASPs). This initiative, part of a broader crackdown on hidden gains and potential money laundering, leverages data analysis to identify inconsistencies. The focus is on Schedule VDA of tax returns, where crypto trades should be declared. A flat 30% tax on virtual digital asset (VDA) gains is mandated under Section 115BBH of the Income Tax Act, with no deductions or loss carry-forwards allowed. Many taxpayers incorrectly attempted to use cost indexation or claim losses under different categories, resulting in interest charges and penalties. This enforcement, the third ‘NUDGE’ (Non-intrusive Usage of Data to Guide and Enable) campaign in six months, uses data from banks, VASP TDS filings, and even blockchain checks to encourage compliance. The campaign aims for a soft-touch approach, prioritizing data-driven identification of discrepancies over aggressive raids. The increased scrutiny significantly raises the stakes for both small-scale traders and cryptocurrency exchanges. Failure to accurately report crypto profits since the 2022-23 fiscal year can lead to notices and additional tax liabilities. Exchanges also face pressure to ensure accurate TDS filings, with inconsistencies potentially triggering investigations into their clients. The long-term impact remains to be seen, with some traders potentially adjusting their practices to mitigate tax liabilities, while others may find the increased regulatory clarity beneficial.

(Source: https://bitcoinist.com/crypto-evasion-under-fire-india-launches-major-enforcement-blitz/)