The identified persons evaded tax on crypto profits, with many failing to disclose digital assets held in wallets with the world’s largest cryptocurrency exchange.
The Central Board of Direct Taxes has instructed investigation wings in different cities to report their actions by Oct. 17, according to sources familiar with the matter.
Many traders used offshore platforms like Binance, hoping they could escape India’s heavy crypto taxation.
According to a report by The Economic Times, this includes a 1% tax deducted at source on every sale plus total profit taxes ranging from 33% to 42% under various tax regimes.
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P2P transactions face increased scrutiny
Tax office investigators are examining peer-to-peer trades on Binance that involved matching buyers and sellers in India, with settlements processed through domestic bank accounts, Google Pay, or in cash.
Mumbai-based chartered accountant Siddharth Banwat noted that the tax department has the authority to issue a summons confirming proper reporting during income tax return filing.
Taxpayers who took aggressive positions by not reporting income can rectify this through filing updated returns at an extra tax cost.
The enforcement action shows India’s strengthened compliance framework for virtual digital assets.
Tax authorities now have access to transactional data from cryptocurrency exchanges, enabling the identification of mismatches and unreported income that previously went undetected.
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Severe penalties await non-compliant traders
Ashish Karundia, founder of the CA firm Ashish Karundia & Co., warned that the veil of anonymity protecting crypto traders is being lifted.
Failure to accurately report virtual digital assets may trigger reassessment or scrutiny, with potential penalties under Section 270A.
More seriously, omission from Schedule FA could attract the Black Money Act, bringing hefty fines and possible prosecution.
Karundia advised taxpayers to undertake a comprehensive reconciliation of VDA activity and explore corrective mechanisms like updated returns before enforcement intensifies.
Once authorities escalate enforcement actions, taxpayers may find themselves with limited options for compliance.
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