India’s Income Tax Department has launched investigations into suspected tax evasion and money laundering involving cryptocurrency and virtual digital assets, targeting high-risk individuals and entities.
I-T Department Targets Suspected Tax Evasion in Crypto Market
India’s Income Tax Department has launched a sweeping investigation into potential tax evasion and money laundering involving virtual digital assets (VDAs), including cryptocurrencies, senior officials revealed on Friday.
The inquiry is part of a broader effort to clamp down on unaccounted income routed through digital channels, which authorities say is increasingly being exploited by high-risk individuals and entities to avoid tax obligations under the Income-tax Act, 1961.
“Such entities and individuals, which are engaged in VDA transactions and have failed to comply with the Income-tax Act, 1961 have been identified for verification,” a tax official familiar with the investigation confirmed, speaking on the condition of anonymity.
Focus on High-Risk Individuals and Unaccounted Wealth
The officials say that those under the department’s radar are believed to have invested substantial sums in cryptocurrencies without reporting the income or complying with tax regulations. The investigations will involve detailed scrutiny of transaction histories and cross-verification of income disclosures with blockchain data and exchange records.
India does not currently recognise crypto assets as legal tender, a position that reinforces the government’s cautious stance on digital currencies. However, cryptocurrency transactions are subject to taxation, with a 30% flat tax on profits from VDAs and a 1% tax deducted at source (TDS) on all transactions above a specified threshold.
Compliance Under Watch
The recent crackdown follows months of concern by Indian regulators and lawmakers over the rise in crypto-related financial misconduct. The anonymity and decentralised nature of cryptocurrency transactions have posed unique challenges to enforcement agencies, who are now deploying data analytics and digital surveillance tools to detect discrepancies.
While many traders and investors have complied with the new crypto tax regime introduced in 2022, authorities remain vigilant about potential loopholes and deliberate evasion.
Officials declined to disclose the exact number of individuals or entities under investigation but confirmed that the verification process is already underway.
The ongoing operation signals a broader move by Indian tax authorities to bring greater transparency and accountability to the rapidly expanding digital asset economy, ensuring that all transactions, whether physical or virtual, remain within the ambit of the law.
