Virtual digital assets: Tax authorities detect undisclosed income of Rs 888.82 crore

Tax authorities detected Rs 888.82 crore of undisclosed income from transactions relating to virtual digital assets (VDAs) during search and seizure operations. Besides, the Enforcement Directorate has also attached proceeds of crime worth Rs 4,189.89 crore in crypto-related cases, arresting 29 persons and filed 22 prosecution complaints. It has also declared one accused as a Fugitive Economic Offender, Lok Sabha was informed on Monday.

“Cases of tax evasion linked to crypto currency and VDAs have been detected by the Central Board of Direct Taxes (CBDT) on multiple occasions, and the Income Tax Department takes action as per the Income Tax Act, 1961. Wherever tax evasion is detected, necessary action, such as nudging taxpayers, e-verification, reassessment, survey, or search and seizure, is taken,” Minister of State for Finance Pankaj Chaudhary said in response to a question on black money in crypto currency.

Under the CBDT’s NUDGE (Non-Intrusive Usage of Data to Guide and Enable) campaign, 44,057 communications have been sent to taxpayers who invested or traded in VDAs but did not report these in Schedule VDA of their Income Tax Returns, he further said.

The government has also brought VDAs under the Prevention of Money Laundering Act, 2002, making Virtual Asset Service Providers (VASPs) Reporting Entities and required to submit specified and suspicious transaction reports to FIU-IND.

Meanwhile, crypto exchange platforms have collected Rs 511.83 crore in tax deducted at source from users in FY25. This was a 41% increase from the Rs 362.7 crore collected by them in FY24 as TDS from users. In FY23, they collected Rs 221.27 crore in tax from users.

“…the Finance Act, 2022, introduced Section 194S in the Income-tax Act, 1961, mandating a 1% Tax Deducted at Source (TDS) on the transfer of Virtual Digital Assets (VDAs). This applies to all transactions, including those involving offshore entities, if the income is chargeable to tax in India. It has been observed that certain offshore cryptocurrency exchanges serving Indian users are not complying with the TDS provisions prescribed under the Income-tax Act,” Chaudhary said in response to another question on taxation of crypto-currency in the country.

The income tax department also carried out survey actions u/s 133A of Income Tax Act 1961 against three Crypto Exchanges and non-compliance of TDS provision u/s 194S to the tune of Rs 39.8 crore and undisclosed income to the tune of Rs 125.79 crore, were detected.