In a decisive step, India will introduce tax on up to 70% on unreported cryptocurrency profits. The move is included in new rules under the Income Tax Act’s Section 158B aimed at clamping down on crypto traders. These announcements were made by Finance Minister Nirmala Sitharaman during the Union Budget 2025.
Under the new amendment, cryptocurrencies are now defined as Virtual Digital Assets (VDAs). This implies crypto profits will be subject to the same scrutiny as conventional assets such as cash, jewelry, and gold. The law requires cryptocurrency gains to be reported, and not reporting them could attract severe penalties.
Indian officials in December 2024 detected 824 crore Indian rupees (or approximately $97 million) of unpaid service and goods taxes (GST) from several crypto exchanges. This is coming after Indian authorities had asked Binance to pay 722 crore Indian rupees (approximately $85 million) in August. These actions reflect the government’s determination to ensuring tax compliance in the thriving crypto space.
The 70% penalty is imposed on profits not disclosed up to 48 months from the applicable tax assessment year. Official documents state that the penalty will be computed as “70% of the sum of tax and interest payable on additional income disclosed in the revised income tax return (ITR).”
This crackdown on undeclared gains comes weeks after Bybit, one of the top crypto exchanges, suspended operations in India. The firm mentioned regulatory pressure as one of the reasons, as it pursues a full operating license from the Financial Intelligence Unit of India.
Internationally, the debate on crypto taxation laws is on fire. In light of recent regulation by the US Internal Revenue Service (IRS), in June 2024, crypto taxation has gained even more attention. From 2025, U.S. centralized exchanges and brokers will report digital asset transactions, potentially pushing investors towards decentralized platforms. This move can make it harder to track tax revenues, as observed by Anndy Lian, who is an expert in blockchain.
While these changes occur, the cryptocurrency space is fighting back. Late December 2024 saw the Blockchain Association sue the IRS, alleging the new regulations unfairly expand reporting requirements to decentralized exchanges. As India’s crypto universe matures, traders need to prepare for the effect of these strict tax laws.
