₹437 Crore and Counting: What India’s AI-Powered Tax Sweep Reveals About Crypto Traders

Image Source : Outlook Money.

India’s Income Tax Department has ramped up its scrutiny of cryptocurrency transactions, collecting ₹437.43 crore in income tax from Virtual Digital Assets (VDAs) in FY 2023–24. This marks a 62 percent increase from the ₹269.09 crore collected in FY 2022–23. The surge is attributed to the deployment of artificial intelligence, machine learning, and data analytics tools aimed at identifying tax evasion and enforcing compliance across the crypto ecosystem.

Key Developments in Crypto Taxation:

- The government introduced a flat 30 percent tax on profits from VDAs in April 2022, alongside a 1 percent Tax Deducted at Source (TDS) on transactions exceeding ₹10,000 from July 2022

- Despite the absence of a real-time matching system, the Income Tax Department actively compares TDS filings by Virtual Asset Service Providers (VASPs) with individual income tax returns to identify discrepancies

- The Central Board of Direct Taxes (CBDT) launched the NUDGE campaign to flag mismatches exceeding ₹1 lakh between reported income and TDS data

Technology-Driven Enforcement:

- The department uses the Non-Filer Monitoring System (NMS), Project Insight, and internal databases to trace unreported crypto transactions

- AI and machine learning algorithms help correlate crypto activity with taxpayer filings, enabling targeted enforcement

- Bulk notices have been issued to individuals who failed to report crypto income despite TDS deductions

Capacity Building and Training Initiatives:

- Tax officers are being trained in blockchain analysis, digital forensics, and legal frameworks related to VDAs

- Workshops, webinars, and Chintan Shivirs are regularly conducted to enhance investigative capabilities

- Short-term training programs in partnership with the National Forensic Science University (NFSU), Goa, equip officers to trace crypto transactions from seized digital evidence

Why This Matters:

The government’s aggressive stance signals a shift toward tech-enabled tax governance. With AI tools and data analytics now central to enforcement, crypto traders can no longer rely on anonymity or offshore platforms to evade taxes. The crackdown also reflects India’s broader push to regulate digital assets and ensure fiscal transparency in a rapidly evolving financial landscape.

Sources: Economic Times, Firstpost, Financial Express, Moneycontrol, Indian Express, BTCC Square