India intensifies crypto tax enforcement, demanding past trade details, using AI tools, and pushing for compliance amid industry calls for reform.
India’s tax authorities are cracking down on crypto investors who hide their digital asset transactions. Recently, the Income Tax Department started sending notices to individuals who failed to report past virtual digital asset (VDA) trades. On August 25, 2025, Koinx, a well-known crypto tax software company, posted the following update on social media. The company cautioned that old trades that were years old could be used to action.
Crypto Tax Enforcement Gets Tech Upgrade
An announcement circulated on social media indicates that authorities are demanding extensive data concerning the 2022-23 financial year. This consists of buy/sell dates, unsold holdings, and connected bank accounts.
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Moving on to the next point, this crackdown is after stringent tax regulations were introduced in May. At the moment, India levies 30 percent of cryptocurrency gains and 1 percent of each transaction. These high rates have made many traders engage in transactions out of the country. Due to this, the crypto market in India is falling behind. Players in the industry and investors are now lobbying the government to relax these requirements. They cite that the high taxation is chasing experts and reducing the participation of India in the international digital economy.
In the interim, the government is forcing the fight against tax evasion. It is employing tools such as data analytics, artificial intelligence (AI), and digital forensics to trace the VDA transactions. Additionally, this move is to help increase compliance to generate more revenue through the crypto earnings. During a recent session of Parliament, authorities disclosed that there will be training of tax officers.
Additional special programs, webinars, and workshops are being conducted with the assistance of the National Forensic Science University (NFSU) in Goa. These trainings are blockchain-related analysis and handling of digital evidence.
India Aims to Close Crypto Tax Loopholes
Furthermore, the notices under Section 133(6) require elaborate records. Investors will be required to supply transaction details, platform information and evidence of fair market value. They should also verify whether they report income in VDAs in their tax returns. The discrepancy with Tax Deducted at Source (TDS) may result in penalties. On the other hand, the government will be keen on seeing that all the crypto trades are captured, including those done many years ago.
On the one hand, this rigorous approach has provoked controversy. Some observers think that the heavy taxation is damaging the potential crypto market of India, worth $15 billion. In addition, they propose amendments that will promote local trading. However, the government still focuses on enforcement. Indian authorities aim to close loopholes affecting over 100 million crypto users in the country. This regulation versus growth will determine the future of crypto in the country.
In summary, the tax authority in India is becoming vigilant in tracking undisclosed crypto transactions. Investors are increasingly under fire; the industry wants policy reforms. The application of hi-tech technology reflects the government’s concern for transparency. Both traders and regulators will be forced to change as this scenario plays out.
