India to tax undisclosed crypto gains under new amendments

India’s Finance Minister Nirmala Sitharaman revealed significant changes to the country’s tax laws, which will now encompass cryptocurrencies under Section 158B of the Income Tax Act. This section deals with undisclosed income, and the amendments were part of the Union Budget 2025 announcement.

The new provisions classify cryptocurrency gains as subject to block assessments if they are not reported, aligning them with the tax treatment of traditional assets such as money, jewelry, and bullion. Cryptocurrencies will be defined as Virtual Digital Assets (VDAs) according to the amendment, which states that a reporting entity will be required to furnish information of crypto assets.

The crypto tax proposition, announced on February 1, 2025, will be applied retrospectively. This follows a report at the end of December 2024 by India’s Minister of State for Finance, Pankaj Chaudhary, who disclosed that the government had identified 824 crore Indian rupees ($97 million) in unpaid goods and service taxes (GST) from several crypto exchanges. Prior to this, in August, Indian law enforcement agencies had demanded 722 crore Indian rupees ($85 million) in unpaid taxes from Binance.

Cryptocurrency traders in India may now face a tax penalty of up to 70% on previously undisclosed crypto profits. This penalty could be applicable to gains that were not disclosed for up to 48 months following the relevant tax assessment year. The document specified that the penalty would be "70% of the aggregate of tax and interest payable on additional income disclosed in the updated income tax return [ITR]."

These amendments come shortly after the Bybit exchange suspended its services in India on January 10, citing regulatory pressures and their ongoing efforts to secure a full operational license from India’s Financial Intelligence Unit.

Globally, crypto tax laws are becoming more prominent. In June 2024, the US Internal Revenue Service (IRS) issued new crypto regulations that will subject US crypto transactions to third-party tax reporting requirements for the first time starting in 2025. This has led to concerns that investors may migrate to decentralized platforms, complicating tax revenue tracking.

In response to these regulations, the Blockchain Association filed a lawsuit against the IRS in December 2024, claiming the rules are unconstitutional as they extend data collection requirements to decentralized exchanges by categorizing them as "brokers."

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