Government Cracks Down on Unreported Crypto Transactions: 44,000 Notices Sent to Taxpayers

On December 8, 2025, Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha that the government has sent more than 44,000 notices to taxpayers who did not report their crypto transactions in their Income Tax Returns.

He also mentioned that the government’s revenue collected through TDS (Tax Deducted at Source) on crypto transactions has more than doubled in the last three years, showing that monitoring and compliance in the crypto space have significantly improved.

In a written reply, he added, “Under the CBDT’s NUDGE (Non-Intrusive Usage of Data to Guide and Enable) campaign, 44,057 communications have been sent to taxpayers who invested or traded in VDAs but did not report these in Schedule VDA of their Income Tax Returns (ITRs).” he further added that “TDS returns filed by Virtual Assets Service Providers (VASPs) and taxpayers’ ITRs are also analysed to identify discrepancies and take appropriate action.”

He also said that the Enforcement Directorate (ED) has been looking into several crypto-related cases under the Prevention of Money Laundering Act (PMLA). So far, the ED has seized or frozen assets worth about Rs 4,189.89 crore that are believed to be linked to criminal activities.

They have also arrested 29 people and filed 22 legal complaints in these cases. Additionally, one person involved has been officially declared a “Fugitive Economic Offender”.

Pankaj Chaudhary’s other data showed that total TDS collected from users by crypto exchange platforms was over Rs 221 crore in 2022-23, which rose to over Rs 511 crore in 2024-25. During this time period, Maharashtra rose to Rs 142 Crore from Rs 293 crore. However, Karnataka recorded the highest growth, with collections reaching around Rs 134 crore from Rs 39 crore.

Per the Finance Act 2022, TDS at the rate of 1 per cent is levied on the transfer of VDA. This applies to all transactions, including those involving offshore entities, if the income is chargeable to tax in India. “It has been observed that certain offshore cryptocurrency exchanges serving Indian users are not complying with the TDS provisions prescribed under the Income-tax Act.”

He also said that when they checked three cryptocurrency exchanges, they found that the companies had not paid about Rs 39.8 crore in TDS (tax), and they also discovered around Rs 125.79 crore of income that had not been reported. He further added, “In addition to the above search and seizure operations under Section 132 and Survey actions under Section 133A of the Income Tax Act, various entities resulted in the detection of undisclosed income related to VDA transactions amounting to Rs 888.82 crore.”

Further, he said, “As cryptos are inherently borderless, they require strong international coordination to prevent regulatory arbitrage. Therefore, any regulatory framework for crypto assets can be effective only with significant international collaboration on the evaluation of the risks and benefits and the evaluation of common taxonomy and standards.”