India Escalates Crypto Tax Crackdown

 

Using AI and global data sharing, India targets crypto tax evaders, aiming to close loopholes and enforce compliance, which could deter investors and boost government revenue amid rising digital asset scrutiny.

India's tax authorities are intensifying efforts to combat crypto tax evasion through AI-driven analytics and international data sharing, as announced by CBDT Chairman Ravi Agrawal and Finance Minister Pankaj Chaudhary. This move, detailed in recent interviews and parliamentary responses, leverages tools like the OECD's Crypto-Asset Reporting Framework (CARF) to track and penalize undeclared crypto transactions, potentially affecting millions of users and the broader crypto market.

ALSO READ Quantum Threat Looms Over Bitcoin

The escalation in crypto tax enforcement stems from India's need to address growing tax evasion in the digital asset space, where transactions often lack transparency. This is driven by the rapid rise in crypto adoption and the challenges of tracking offshore holdings. How it's happening involves deploying advanced AI tools to cross-reference tax deducted at source (TDS) data from crypto exchanges with individual income tax returns, flagging discrepancies above $1,200. Additionally, India is engaging in CARF, a global standard that facilitates automatic exchange of crypto transaction data between countries, ensuring that evaders cannot hide assets abroad. This approach combines domestic surveillance with international cooperation to create a more robust enforcement net.

ALSO READ Modi Celebrates 60 Years of India-Maldives Ties

Officials have been vocal about the strategy. CBDT Chairman Ravi Agrawal stated in an Economic Times interview, "The goal is to place crypto transactions under international tax agreements so there is alignment among nations." Similarly, Minister of State Pankaj Chaudhary confirmed in a Lok Sabha reply that data analytics tools are used to detect evasion from virtual digital asset (VDA) transactions. Experts like Saravanan Pandian, CEO of KoinBX, told Decrypt, "It may be too early to comment on how this move may impact crypto exchanges," while CA Sonu Jain of 9Point Capital added, "India is preparing for a future where wallet visibility and automatic data exchange become routine," highlighting the balance between enforcement and privacy.

ALSO READ Cambodia Urges Ceasefire in Deadly Border Clashes

This crackdown could significantly impact individuals, potentially leading to increased scrutiny and penalties for non-compliant users, while fostering greater tax awareness. For the market, it might reduce crypto adoption in India due to higher compliance costs and fear of audits, possibly causing short-term volatility in digital asset prices. On the policy front, it aligns India with global standards, potentially increasing government revenue—already at $818 million since 2022—and pushing for stricter regulations that could influence international crypto policies.

ALSO READ Musk Backs Grok AI After Viral Medical Diagnosis Success

The context dates back to India's 2022 overhaul of its crypto tax regime, which introduced a 30% tax on profits and 1% TDS on transactions, generating substantial revenue. This was a response to the crypto boom during the pandemic, with past events like the 2021 G20 summit discussions on crypto regulation setting the stage. India's participation in OECD initiatives, including CARF, builds on earlier efforts to curb evasion, such as the 2019 crackdown on black money, reflecting a broader trend of tightening controls as crypto evolves from a niche to a mainstream financial tool.

ALSO READ Samsung Begins Galaxy S26 Ultra Software Development

Currently, enforcement is active but limited by the absence of real-time surveillance, with AI matching occurring post-filing. Expected next steps include full CARF implementation by 2027 and expanded AI capabilities, potentially leading to more automated notices. Experts like Jain suggest this could enhance global tax harmony, but warn of privacy trade-offs, urging users to ensure compliance to avoid future risks in an increasingly regulated crypto landscape.

Disclaimer: This article was generated with the support of AI and edited for clarity by the PulseNext team. Except for the headline and featured image, the content is sourced from a syndicated feed. For details, please refer to our [Terms & Conditions].