The Indian tax agency is expanding enforcement against unreported digital asset transactions, imposing penalties of up to 200% of the tax value.
The Indian Income Tax Department has initiated a serious enforcement campaign targeting previously unreported cryptocurrency transactions, marking a significant turning point in the management of digital assets in the world's second-largest population market.
According to a notice from KoinX, a leading cryptocurrency tax software provider, the tax agency has begun sending official notices under Section 133(6) to individuals with unreported virtual digital asset transactions. This move focuses not only on recent activities but also traces transactions from many years ago.
The scope of control has been comprehensively expanded, including detailed data for the financial year 2022-23, requiring taxpayers to provide information on transaction dates, unliquidated balances, and linked bank accounts. These requirements reflect the government's determination to ensure full tax compliance in the digital asset sector.
Severe consequences of non-compliance
KoinX warns that ignoring tax notices could lead to severe financial consequences. Taxpayers may face daily fines, the possibility of reassessment, and most seriously, penalties that could reach up to 200% of the tax that has been evaded. In extreme cases, violations can lead to criminal prosecution.
The main sources of these notices include improperly reported withholding tax (TDS), discrepancies in Form 26AS or Annual Information Statement, unreported transactions on centralized, decentralized, or foreign exchanges, along with invalid deductions.
For cryptocurrency investors, this situation creates significant pressure regarding legal compliance. Monitoring and accurately reporting transactions across various platforms becomes a major challenge, especially as cryptocurrency tax regulations remain complex and are still being refined.
KoinX recommends that taxpayers maintain complete records of all cryptocurrency transactions, ensure that all wallets and exchange accounts are declared in their income tax returns, and regularly monitor for any discrepancies that may occur in official records.
This enforcement campaign reflects a global trend towards increased oversight of digital assets. While stringent measures may create short-term challenges, many experts believe that a clear and transparent legal framework will benefit the sustainable development of the cryptocurrency market in the long run.