Introduction
The Indian government has brought cryptocurrency regulations into sharper focus with a major move in the Union Budget 2025. According to Finance Minister Nirmala Sitharaman, gains made in cryptocurrencies that remain undisclosed will come under Section 158B of the Income Tax Act and will be considered black money just like undeclared cash, gold, and jewelry. Crypto investors who fail to report their earnings may now attract a 70% tax penalty.
As such, this amendment is part of the government's strategy to make the digital asset sector more responsive to tax and prevent money laundering and tax evasion.
Key Crypto Tax Changes in India
1. Flat tax on cryptocurrency gains at 30% All cryptocurrency income declared are taxed at flat 30%. No deductions except for the acquisition cost are permissible.
2. Crypto transactions to have 1% TDS. A 1% TDS is applicable on all crypto transactions that exceed ₹50,000 or ₹10,000 in certain cases. This rule has been in effect since July 1, 2022.
3. 70% Tax Penalty on Undisclosed Crypto Gains If the crypto earnings are not reported, it will be regarded as income undeclared under Section 158B. That would attract a penalty of 70% on such earnings. The government will do block assessments to trace unreported crypto transactions.
Why Has India Introduced This Tax Rule?
The Indian government has been skeptical about cryptocurrencies as they can be used for various illicit financial activities. The new tax law looks to:
✅ Ensure that crypto investors do not evade taxes.
✅ Cut down black money circulation in digital assets.
✅ Increase government revenue from cryptocurrency trading.
Strengthen financial regulations for crypto transactions.
India is a growing hub for crypto trading, and the government wants to balance innovation with regulation.
How to Avoid the 70% Tax Penalty?
Crypto investors shall abide by the following measures in order to avoid facing penalties:
✔️ Report all crypto transactions in income tax filings.
✔️ Maintaining correct records for all crypto trades, purchases, and transfers.
✔️ Deduct and report the 1% TDS on eligible transactions.
✔️ Consult a tax expert in order to ensure proper compliance.
Ignoring these rules may lead to very severe financial penalties and legal action.
What's the next for cryptocurrency in India?
The Union Budget 2025 signals that India is moving towards regulating, rather than banning, cryptocurrency. Future policies may introduce clearer guidelines on crypto usage, taxation, and trading.
For investors, this means adapting to new tax laws, staying informed, and filing accurate tax returns to avoid penalties.
Final Thoughts
This is a major shift in India's cryptocurrency tax policy, as there is a 70% penalty on undisclosed crypto gains. Investors must ensure full transparency in their earnings to avoid hefty fines. As regulations continue to evolve, staying compliant will be key to successful crypto investments in India.