Crypto Crackdown: CBDT Targets Tax Evasion in Digital Investments

The Central Board of Direct Taxes (CBDT) is intensifying efforts to tackle tax evasion through cryptocurrency investments. The board is targeting high-risk entities and individuals who have bypassed compliance with the Income-tax Act, 1961, with particular attention to those involved in Virtual Digital Asset (VDA) transactions.

According to the Finance Act, 2022, Section 115BBH of the Income Tax Act mandates a 30 percent flat tax on VDA transfers, with no deductions allowed except for acquisition costs. Alleged violations include not filing the necessary tax schedules and inaccurately reporting income at reduced rates.

In response to these issues, the CBDT is cross-referencing individual tax returns with reports from crypto exchanges. Thousands of potential defaulters have been notified via email, urging a review of their tax returns. This initiative is part of CBDT's NUDGE strategy to foster compliance among taxpayers.

(With inputs from agencies.)