70% Tax Penalty for Unreported Crypto Gains in India

The Indian Government is not taking it easy at all with crypto trading, with the undisclosed gains incurring tax penalties of up to 70%. This amendment was introduced under Section 158B of the Income Tax Act by Finance Minister Nirmala Sitharaman through the union budget 2025. 

Crypto is now categorized as Virtual Digital Assets (VDAs) under new rules that can impose heavy fines on unreported gains going back to the past four years. Another reason for embracing this new system is that crypto exchanges and financial institutions are required to report all crypto-related transactions to the authorities. These tax rules now class crypto earnings in the same wrapper as cash, jewelry, and gold assets.

The Indian government is already tightening the noose on tax evaders in the crypto sector. In the previous year, authorities found $97 million worth of outstanding Goods and Services Tax (GST) associated with crypto exchange platforms. Big entities like Binance and Bybit have already come under scrutiny, with the company ceasing its operations in India on January 10 as a result of regulatory pressure.

India isn’t the only country to tighten crypto regulations. The Internal Revenue Service (IRS) in the U.S. will begin imposing more stringent reporting on tax payments for digital asset transactions in 2025. The move has drawn backlash, with some crypto groups even suing the IRS, claiming that the updated rules are unconstitutional.

As these stricter tax regulations take effect, Indian crypto investors must exercise a great deal of caution when it comes to reporting their earnings. The government is getting increasingly aggressive in its enforcement, and not reporting crypto profits could lead to huge penalties. This move is in line with India’s continued push to regulate the crypto industry, making it even more important for traders and investors to stay up-to-date and compliant with tax laws.