Rs 437 Crore Tax Collection: Crypto Traders Face Challenges in Evading Income Tax as Tax Department Leverages AI and Data Analytics

In India, the Income Tax Department is intensifying efforts to monitor transactions related to cryptocurrencies and virtual digital assets (VDAs). Utilizing advanced technologies like AI and machine learning, the government aims to trace tax evasion effectively. In FY 2022-23, it collected Rs 437 crore from VDA-related income, implementing specific tax regulations under section 115BBH of the Income Tax Act, 1961. Members of Parliament have raised concerns about potential revenue loss from under-reporting and the efficacy of technological tools in detecting discrepancies. Although a centralized system for real-time data matching is not fully operational, the NUDGE campaign is in place to identify tax return discrepancies related to VDA transactions. Additionally, the government conducts ongoing training programs for tax officials to bolster monitoring capabilities in the crypto ecosystem. Taxpayers failing to disclose crypto earnings may face substantial penalties under Section 270A, reinforcing the importance of compliance in the rapidly evolving digital asset landscape.

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