Increased Cryptocurrency Tax Surveillance in India through International Data Exchange and Artificial Intelligence
India is taking a proactive approach to combat crypto tax evasion by leveraging artificial intelligence (AI) and participating in international data-sharing frameworks, such as the Organisation for Economic Co-operation and Development's (OECD) Crypto-Asset Reporting Framework (CARF).
The Central Board of Direct Taxes (CBDT) is using AI-driven analytics to cross-reference data, like tax deducted at source (TDS) from crypto exchanges, against income tax returns. This system automatically issues notices when discrepancies exceed ₹1 lakh (approximately $1,200). The AI systems analyse over 6.5 billion domestic digital transactions annually, enabling the tax authorities to detect unreported crypto trades and inconsistencies efficiently.
India's alignment with OECD protocols allows the sharing of cross-border crypto transaction data, helping to track offshore holdings and create a standardized approach to crypto taxation globally. This initiative has already led to significant tax collections, with the CBDT reporting ₹700 crore (approximately $818 million) collected in this intensified enforcement drive, alongside voluntary disclosures of substantial foreign crypto assets and income.
The Indian Income Tax Department is also using data analytics to trace and detect tax evasion from VDA (Virtual Digital Asset) related transactions. However, real-time matching of VDA-related transactions, filed in ITRs (Income Tax Returns), with information filed by VASPs (Virtual Asset Service Providers) is not currently being carried out by the department.
CA Sonu Jain, the chief risk and compliance officer at 9Point Capital, stated that India is preparing for a future where wallet visibility and automatic data exchange become routine in the crypto industry. Jain also noted that the clarification that "wallet-level access or access to crypto accounts of taxpayers" is permitted only during search or survey operations such as an income tax raid, strikes a balance between enforcement and user privacy.
These efforts are part of a broader AI-powered crackdown on tax evasion, with authorities focusing on search and seizure actions triggered by detected anomalies, thus protecting compliant taxpayers’ privacy. The new crypto tax regime imposes a flat 30% tax on all profits from crypto and a 1% TDS on transactions above a specified threshold. India is participating in the OECD's CARF to enable automatic sharing of crypto tax data across borders, further strengthening its stance against crypto tax evasion.
- By leveraging artificial intelligence (AI) in cross-referencing data from digital currency exchanges with income tax returns, India's Central Board of Direct Taxes (CBDT) aims to combat crypto tax evasion, issuing notices when discrepancies exceed ₹1 lakh.
- With the use of AI systems, India is able to analyze over 6.5 billion domestic digital transactions annually, helping to identify unreported digital currency trades and inconsistencies.
- India's participation in international frameworks such as the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF) allows for the sharing of cross-border crypto transaction data and helps to track offshore holdings.
- The Indian Income Tax Department is using data analytics to trace crypto-related tax evasion, although real-time matching of VDA (Virtual Digital Asset) transactions with information from Virtual Asset Service Providers (VASPs) is not yet implemented.
- CA Sonu Jain, the chief risk and compliance officer at 9Point Capital, believes India is preparing for a future where crypto wallet visibility and automatic data exchange become standard in the industry.
- The new crypto tax regime in India imposes a flat 30% tax on all profits from digital currency, as well as a 1% TDS (Tax Deducted at Source) on transactions above a specified threshold.
- To strengthen its stance against crypto tax evasion, India is participating in the OECD's CARF to facilitate automatic sharing of crypto tax data across borders, safeguarding compliant taxpayers’ privacy and contributing to a standardized approach to crypto taxation globally.
