The Income Tax Department, under the advisory of the Central Board of Direct Taxes (CBDT), has begun emailing thousands of taxpayers over undisclosed cryptocurrency earnings, covering the assessment years 2023–24 and 2024–25. This move, part of the ongoing NUDGE campaign, signals a new phase of regulatory enforcement targeting digital asset compliance.
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Many Indian investors conducted substantial trades of virtual digital assets (VDAs) like Bitcoin, Ethereum, and new crypto tokens in recent years. However, a large number failed to report this income in their annual returns. The department, using data from Virtual Asset Service Providers (crypto exchanges) and TDS filings, has identified high-risk profiles and issued reminder emails to those who overlooked Schedule VDA.
The messages advise recipients to file revised tax returns if they omitted or underreported crypto income. This approach, prefaced as “Non-intrusive Usage of Data to Guide and Enable” (NUDGE), reflects a shift from punitive action toward encouraging voluntary compliance, part of the government’s “Trust Taxpayers First” ethos.
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Income from crypto transactions is taxed under Section 115BBH of the Income Tax Act at a flat 30%, plus applicable surcharges and cess. No deductions other than the cost of acquisition, can be claimed, and losses cannot be offset against other income or carried forward. Taxpayers who wrongly declare or ignore crypto profits may now face deeper scrutiny and potential penalties.
Officials noted it’s the third NUDGE initiative this year; prior campaigns involved foreign asset disclosures and bogus deduction claims. By sending these emails, CBDT aims to preempt escalated action through audits or enforcement.
About the Author – Anirudh Mittal is a B.Sc. LL.B. (Hons.) student at National Forensic Sciences University, Gandhinagar, with a keen interest in corporate law and tech-driven legal change.