India’s tax authorities have ramped up enforcement in the cryptocurrency space, sending a strong signal that digital asset transactions must be transparently reported and taxed. In a major compliance push during late 2025, the Central Board of Direct Taxes (CBDT) issued over 44,000 alerts and notices to taxpayers who failed to disclose their cryptocurrency dealings in their income tax returns — underscoring the government’s efforts to reign in tax evasion and unreported gains in virtual digital assets (VDAs) like cryptocurrencies.
Why This Matters to Crypto Investors
Cryptocurrencies — including Bitcoin, Ethereum, and other Virtual Digital Assets (VDAs) — have seen explosive growth in India and globally. However, India does not yet have a dedicated regulatory framework for crypto assets, and the tax regime treats them strictly under existing tax laws. Despite this, many investors have either under-reported or entirely omitted gains from crypto transactions in their Income Tax Returns (ITRs), leading to a large compliance gap.
Recognising this, the CBDT has leveraged advanced data analytics and compliance systems to identify and flag discrepancies between actual crypto activity and what taxpayers reported in their tax returns. The findings — and resulting actions — have significant implications for every crypto investor and trader in India.
CBDT’s Action: Alerts Under the NUDGE Campaign
The CBDT’s “NUDGE” campaign (Non-Intrusive Usage of Data to Guide and Enable) is at the centre of this initiative. Under this campaign, over 44,057 communications — including emails and SMS messages — were sent to individuals and entities who either failed to report or under-reported their crypto transactions in the Schedule VDA of their ITRs.
These alerts:
Inform taxpayers about discrepancies between their crypto trading or investment activity and what they declared in their returns.
Encourage voluntary compliance by asking recipients to revise their tax filings if necessary.
Serve as early warnings — ignoring them may trigger further action such as reassessments, scrutiny, or surveys by tax authorities.
This non-intrusive approach reflects the government’s aim to improve voluntary compliance first, before resorting to harsher enforcement measures.
How CBDT Identifies Unreported Crypto Transactions
The success of this exercise lies in data analytics. The Income Tax Department has integrated several tools and data sources to track and verify virtual digital asset activity:
Also Read :- Taxation on Cryptocurrency in India – Complete Guide for 2025
Data Analytics Tools
-
Project Insight – Matches reported income with actual transactional patterns across multiple financial databases.
-
Non-Filer Monitoring System (NMS) – Flags taxpayers who appear to have income from crypto transactions but did not file returns or did not show expected income.
-
Exchange Data – Tax authorities also receive transactional data from Virtual Asset Service Providers (VASPs) and analyze TDS (Tax Deducted at Source) data to find mismatches.
This combination of data sources enables tax authorities to identify unreported or understated crypto earnings with unprecedented precision — even when VDAs are traded offshore or through multiple platforms.
Undisclosed Income Detected So Far
The CBDT’s efforts have already uncovered significant amounts of undisclosed income linked to crypto transactions. According to recent government disclosures:
₹888.82 crore of undisclosed income was identified during search and seizure operations.
Authorities attached over ₹4,189.89 crore in crypto-related cases under the Prevention of Money Laundering Act (PMLA).
Nearly 29 arrests and 22 prosecution complaints were filed in connection with crypto tax evasion and money laundering investigations.
Such figures highlight the scale of unreported crypto gains and the government’s resolve to bring them within the taxable domain.
Crypto Taxation: What Investors Should Know
To understand the importance of reporting, it’s crucial to grasp how crypto income is taxed in India:
Tax Rates
-
Gains from crypto transactions are taxed at a flat 30% under Section 115BBH of the Income Tax Act, plus applicable surcharge and 4% health and education cess.
TDS Requirement
-
A 1% TDS is applicable on every transfer of VDAs, including sales, exchanges, and swaps. This provision was introduced through the Finance Act 2022 and remains in effect.
Schedule VDA
-
Taxpayers are required to disclose crypto transaction details under Schedule VDA when filing ITRs. Failure to do so triggers scrutiny and potential enforcement actions.
This strict framework leaves little room for ambiguity — but many taxpayers either did not understand the rules or ignored them, leading to the current enforcement drive.
Impact on Crypto Traders and Investors
The CBDT notices have caught the attention of thousands of crypto holders across India. Many traders — retail and high-net-worth investors alike — who previously treated crypto as an informal investment avenue without full tax disclosure are now being brought back into compliance.
Ignoring these notices can lead to:
Penalties and interest on unpaid tax amounts
Reassessment of past returns
Search and seizure operations
Possible prosecution for deliberate evasion
The government’s position is clear: Reporting virtual digital asset gains is no longer optional — it’s a mandatory compliance requirement.
What Crypto Investors Should Do Now
If you’ve received a CBDT alert or suspect you might be non-compliant, here’s a practical checklist:
1. Review Your ITR
-
Check whether you included all crypto transactions in Schedule VDA.
-
Reconcile your exchange and wallet records with what’s reported in your tax return.
2. Rectify or File Revised Returns
-
If discrepancies are found, file a revised return before the tax department takes further action.
-
Use accurate cost and sale data from exchange reports and wallet histories.
3. Seek Professional Help
-
Consult a tax advisor or Chartered Accountant (CA) who specializes in crypto taxation.
-
They can help interpret complex cases, especially if multiple years of transactions are involved.
4. Respond to Notices Promptly
-
Not responding to a notice can escalate enforcement actions like reassessment, surveys, or even prosecution.
Looking Ahead: A New Era of Crypto Compliance
India’s crypto tax enforcement reflects global trends where governments insist on transparency and compliance. The CBDT’s 44,000+ alert campaign demonstrates:
A data-driven approach to tax enforcement.
Increased scrutiny on digital assets and borderless transactions.
Stronger compliance expectations for investors and service providers.
In time, clearer crypto regulations may emerge — but until then, Indian taxpayers must adhere to existing laws and proactively ensure accurate reporting of all crypto-related income. Ignoring this wave of enforcement could result in costly penalties and legal repercussions.
Conclusion:
India is tightening the screws on undisclosed crypto transactions. With 44,000+ notices issued, advanced analytics in play, and significant undisclosed income unearthed, the CBDT’s crypto compliance campaign is a watershed moment in virtual asset taxation. For all crypto traders and investors in India, proactive compliance isn’t just good practice — it’s essential to avoid future disputes with tax authorities.