The Central Board of Direct Taxes (CBDT) has detected undisclosed income of Rs 888.82 crore arising from virtual digital assets (VDAs), which include cryptocurrencies and non-fungible tokens held, invested
or traded on blockchain platforms, as reported by Moneycontrol.
The tax department has issued 44,507 communications to these taxpayers, advising them to report such income correctly in Schedule VDA while filing their Income Tax Returns.
Minister of State for Finance Pankaj Chaudhary informed Parliament that the Enforcement Directorate, after investigating several crypto-related cases under the Prevention of Money Laundering Act (PMLA), has attached, seized or frozen VDA-linked proceeds worth Rs 4,189.89 crore. A total of 29 people have been arrested so far and 22 prosecution complaints have been filed. One of the accused has been declared a fugitive economic offender.
Under PMLA rules, virtual asset service providers are required to submit specified and suspicious transaction reports to the Financial Intelligence Unit India. These reports are analysed and shared with enforcement agencies for further action.
Chaudhary said the government uses data analytics tools, Project Insight and internal databases to match VDA transaction details with the disclosures made in income tax returns. TDS filings submitted by virtual asset service providers are also cross-checked with taxpayers’ ITRs to identify gaps and take necessary action.
In India, crypto or VDAs are not legal tender or currency, meaning they cannot be used like the Indian Rupee to buy goods or services. You can’t walk into a store and pay with Bitcoin or Ethereum.
Instead, VDAs are treated as a digital asset where people can buy, hold, or sell these assets as part of their investment portfolio to diversify and potentially grow their wealth.
In other words if someone buys Bitcoin or Ethereum in India, they’re not using it as money but as an investment, just like buying shares of a company. The value of Bitcoin, like a stock, can go up or down depending on market demand and global trends.
Any profit or gain from selling or conversion of one VDA into another VDA is taxed at flat 30%, irrespective of the holding period (i.e no distinction between short term and long term gain).
On top of the 30% rate, an additional tax of surcharge (as per income income level) and cess at the rate of 4% are payable, slightly increasing the effective tax rate.
