Indian crypto holders are subject to a 70% tax penalty on unreported gains
As part of the newly implemented regulations under Section 158B of the Income Tax Act, India will levy tax penalties of up to 70% on undisclosed crypto gains.
New amendments to India’s tax laws may result in substantial tax penalties for cryptocurrency merchants who have previously failed to disclose their profits.
According to the Union Budget 2025 announcement by Indian Finance Minister Nirmala Sitharaman, cryptocurrency will be incorporated into Section 158B of the Income Tax Act, which is responsible for reporting undisclosed income.
If not reported, the amendment permits cryptocurrency gains to be subject to block assessments, thereby subjecting them to the same tax treatment as conventional assets such as money, jewelry, and bullion.
The amendment specifies that virtual digital assets (VDAs) will encompass cryptocurrency: “Under the current definition of Virtual Digital Asset, the term “crypto asset” has been defined in section 2(47A) of the Act…” Section 285BAA of the Act may mandate that a reporting entity provide information regarding crypto assets.
The new crypto tax proposition will be retroactively applicable beginning on February 1, 2025. India’s Minister of State for Finance, Pankaj Chaudhary, announced at the conclusion of December 2024 that the government had discovered 824 crore Indian rupees ($97 million) in outstanding goods and service taxes (GST) by numerous crypto exchanges.
Binance was required to pay 722 crore Indian rupees ($85 million) in delinquent taxes by Indian law enforcement agencies in August, according to the report.
Indian authorities may impose a tax penalty of up to 70% on previously undisclosed crypto profits as a demonstration of their concern for cryptocurrency holders.
According to the document, this penalty may be applicable to crypto gains that were unexposed for a period of up to 48 months following the pertinent tax assessment year.
“The updated income tax return [ITR] discloses 70% of the aggregate of tax and interest payable on additional income.”
Bybit exchange suspended its services in India on January 10, citing regulatory pressure, due to ongoing efforts to obtain a complete operational license from India’s Financial Intelligence Unit. The amendments were implemented two weeks later.
In June 2024, the US Internal Revenue Service (IRS) issued a new crypto regulation that sparked a global surge in interest in crypto tax laws. This regulation will subject US crypto transactions to third-party tax reporting requirements for the first time.
The sales and exchanges of digital assets, including cryptocurrencies, will be reported by centralized crypto exchanges (CEXs) and other intermediaries beginning in 2025.
Anndy Lian, an author and intergovernmental blockchain expert, stated to Cointelegraph that this decision could result in crypto investors transitioning to decentralized platforms, which could create a “paradoxical situation” that would complicate the tracking of tax revenue.
The Blockchain Association launched a lawsuit against the IRS in December 2024, showcasing the crypto industry’s opposition. The association argued that the rules are illegal because they extend data collection requirements to decentralized exchanges under the “broker” term.
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