The Blubber

Crypto traders in India may soon face hefty tax penalties on undisclosed gains following new amendments to the country’s tax laws.

India’s Finance Minister, Nirmala Sitharaman, announced in the Union Budget 2025 that cryptocurrency profits will be included under Section 158B of the Income Tax Act, which governs unreported income. This change will subject crypto earnings to block assessments if not disclosed, placing them on par with traditional assets like cash, jewelry, and bullion for tax purposes.

The amendment defines cryptocurrencies as Virtual Digital Assets (VDAs). According to the new provision:
“Crypto asset has been defined in section 2(47A) of the Act under the existing definition of Virtual Digital Asset[…] A reporting entity, as may be prescribed under section 285BAA of the Act, will be required to furnish information of crypto asset.”

The new crypto tax regulations will be retrospectively enforced starting February 1, 2025.

At the end of December 2024, India’s Minister of State for Finance, Pankaj Chaudhary, revealed that the government had identified unpaid goods and services taxes (GST) totaling 824 crore Indian rupees ($97 million) owed by several cryptocurrency exchanges. This discovery followed demands for 722 crore rupees ($85 million) in unpaid taxes from Binance in August 2024.

Tax Penalties Up to 70% on Undisclosed Crypto Gains
Indian authorities may impose penalties as high as 70% on previously undisclosed crypto profits, raising concerns for cryptocurrency investors.

The penalty could apply to undisclosed crypto earnings up to 48 months after the relevant tax assessment year. As outlined in the document:
“70% of the aggregate of tax and interest payable on additional income disclosed in the updated income tax return [ITR].”

The amendments come just two weeks after crypto exchange Bybit suspended its services in India on January 10, 2025, citing regulatory pressures while it seeks a full operational license from India’s Financial Intelligence Unit.