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CBDT probe on crypto tax evasion has intensified, putting thousands of Indian crypto investors under the scanner for not disclosing Virtual Digital Assets (VDAs) or paying due taxes. If you hold or trade crypto, here’s what you must know to stay compliant and avoid penalties.
What Triggered the CBDT Probe on Crypto Tax Evasion?
The Central Board of Direct Taxes (CBDT) has flagged high-risk cases where crypto transactions were not reported in ITRs. This crackdown aligns with the government’s push to curb money laundering and tax evasion through VDAs.
Key triggers include:
- Large crypto trades with no matching income declaration
- Offshore wallet usage without disclosure under foreign asset norms
- Suspicious layering or conversion of crypto profits into cash or other assets
How is Crypto Taxed in India?
The Finance Act, 2022 introduced a dedicated tax regime for Virtual Digital Assets:
- 30% tax on profits from transfer of VDAs
- 1% TDS on transfer amount (Section 194S)
- No deduction for expenses other than acquisition cost
- Losses cannot be set off against other income
Reference: CBDT Circular No. 13 of 2022
What Should Crypto Investors Do Now?
Step-by-Step Compliance:
Check Your Records
Gather all exchange statements, P2P trades, and wallet balances.
Update Your ITR
If you missed declaring VDAs, file an ITR-U (Updated Return) under Section 139(8A) within 2 years.
Pay Dues & Interest
Pay tax plus interest to avoid penalty and prosecution.
Keep Future Records Clean
Maintain transaction logs, TDS proofs, and wallet addresses for future assessments.
Practical Tip from Experts
💡 “Always separate your crypto income records from regular business or capital gains. This helps avoid mismatches during scrutiny and speeds up assessments.” — Efiletax Tax Experts.
Possible Consequences for Non-Compliance
- Penalty equal to tax amount under Section 270A
- Prosecution under Income Tax Act and PMLA for serious cases
- Freezing of bank or crypto exchange accounts
CBDT notices clearly warn that voluntary compliance can mitigate harsher consequences.
FAQs on CBDT Probe on Crypto Tax Evasion
Q1. What is a VDA under Indian law?
Any cryptocurrency, NFT or similar digital asset is classified as a Virtual Digital Asset.
Q2. Can I revise my ITR to include crypto?
No. Use ITR-U (Updated Return). Regular revision window does not apply to undeclared VDAs.
Q3. Does TDS apply on P2P crypto trades?
Yes. Section 194S covers even peer-to-peer transactions if they cross the threshold.
Final Words & CTA
CBDT probe on crypto tax evasion signals that hiding crypto trades is no longer an option. If you’ve received a notice or wish to declare your VDAs correctly, Efiletax can help you file your ITR-U and stay penalty-free.
👉 Talk to Efiletax Experts Now
Summary
CBDT probe on crypto tax evasion targets non-disclosure of Virtual Digital Assets (VDAs). Indian investors face notices and potential penalties. Check your records, file an ITR-U if needed, and comply with VDA tax rules to avoid legal trouble. Efiletax can assist you.