India's tax and enforcement agencies have increased scrutiny on cryptocurrency activities, focusing on unreported holdings and transactions without new regulatory laws as of late 2023.
This heightened oversight affects crypto market compliance, causing challenges for both domestic and international exchanges.
India’s tax and enforcement arms have increased scrutiny on crypto transactions using existing tax and AML laws, without introducing a new crypto ban or comprehensive regulatory law. Authorities employ data-matching techniques to flag non-compliance and crypto risks. AML/CFT Guidelines by Financial Intelligence Unit of India
The Central Board of Direct Taxes and the Ministry of Finance are central to this effort, utilizing tax data to detect undisclosed crypto holdings. 44,057 notices were issued to taxpayers failing to disclose crypto transactions. Enforcements leverage the 30% tax and PMLA framework.
44,057 Tax Notices Issued for Crypto Non-Disclosure
Indian exchanges face increased compliance demands, while offshore exchanges encounter penalties and operational restrictions. Domestic platforms gain liquidity as international venues lose access. These actions reflect crypto’s classification as a significant AML and tax risk.
With a focus on revenue, the Indian government maintains a 30% tax on gains and 1% TDS on transfers. Enforcement actions have led to ₹28 crore in penalties. The framework impacts BTC, ETH, and other VDAs, consolidating trading on compliant exchanges. Here is a direct quote:
CBDT Chairperson, Central Board of Direct Taxes (CBDT), "We have issued 44,057 notices to taxpayers who did not disclose crypto holdings or trades in their income-tax returns for FY 2024–25."
India's Evolving Crypto Regulation Since 2022
Since 2022, India has tightened control over crypto, initially imposing a 30% tax as a regulatory placeholder. This escalated to AML enforcement under PMLA, with consistent actions against both domestic and offshore exchanges reflecting a pattern of risk-based supervision. Official Gazette Document from Government of India
Expert analyses reveal India’s crypto regulation relies on stringent tax and compliance measures, avoiding outright bans while curbing risks. Industry leaders hope for tax reconsideration to enhance investor protection, suggesting regulatory flexibility in future budgets.
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