India Uncovers Hidden Crypto Fortunes, Sends 44,000 Tax Notices in Massive Crackdown

India's Crypto Crackdown: Rs 630 Crore in Unreported Income Uncovered Amid Tax Enforcement Surge

In a significant escalation of tax enforcement against the cryptocurrency sector, India's Income Tax Department has uncovered Rs 630 crore (approximately $75 million USD) in undisclosed crypto income through extensive search and seizure operations. The government has also issued over 44,000 notices to individuals for failing to report their cryptocurrency transactions in their income tax returns (ITRs), signaling a new level of regulatory scrutiny over digital asset trading in the country.

This development comes amid a growing push by the Indian government to regulate the Virtual Digital Assets (VDAs) sector, as the nation attempts to strike a balance between technological innovation and financial accountability.

The Crackdown: What Triggered It?

The current enforcement drive represents one of the most sweeping actions taken by Indian tax authorities against crypto traders and investors. More than 44,000 notices have been dispatched to individuals believed to be actively trading cryptocurrencies without disclosing the activity in their tax filings.

Source: X

According to officials, this move is part of a larger initiative aimed at curbing tax evasion and bringing transparency to the use of VDAs such as Bitcoin, Ethereum, and other altcoins.

The Rs 630 crore figure was revealed during a series of coordinated raids and forensic investigations carried out by the Income Tax Department. Officials stated that they were able to identify and trace suspicious wallet addresses, monitor blockchain transaction histories, and examine data from domestic and international cryptocurrency exchanges to uncover undeclared gains.

This revelation was first shared on social media by business journalist Sapna Singh, who reported that these search and seizure operations revealed massive underreporting of crypto earnings.

How the Authorities Did It

The Income Tax Department’s investigation relied heavily on digital forensics, data analytics, and blockchain tracking tools. According to senior officials involved in the operation, the department partnered with several tech firms to employ sophisticated tracking software capable of scanning thousands of wallet addresses and linking them to known users.

Source: X

Additionally, information gathered from Indian crypto exchanges, offshore platforms, and centralized KYC (Know Your Customer) data enabled the government to match identities with transaction histories.

Searches were conducted at the premises of individuals and entities suspected of using shell companies and pseudonymous identities to conceal their profits.

Legal Standing and Existing Tax Framework

While India has yet to officially legalize or ban cryptocurrencies, it has introduced a clear tax framework. Since April 2022, a 30% tax on capital gains from crypto trading and a 1% Tax Deducted at Source (TDS) on all transactions exceeding Rs 10,000 have been implemented.

Despite the clarity of the law, many traders and investors reportedly failed to comply, either out of ignorance or in an effort to avoid tax liabilities.

Tax experts have noted that the government’s aggressive action is a message to the crypto community: non-compliance will not be tolerated, and the anonymity of blockchain will no longer be a shield.

Challenges in the Indian Crypto Market

India’s cryptocurrency market, one of the largest in the world, has faced significant turbulence due to inconsistent policies, high taxes, and lack of regulatory clarity.

The 30% tax on crypto profits and 1% TDS have drastically reduced trading volumes across Indian exchanges, discouraging both retail and institutional investors. Major players have moved their operations offshore to friendlier jurisdictions such as Singapore and Dubai.

Moreover, India continues to hold off on launching Exchange-Traded Funds (ETFs) and other regulated crypto investment vehicles, further stifling institutional growth.

Meanwhile, Indian authorities remain firm. The Finance Ministry reiterated recently that it has no immediate plans to revise the current crypto tax regime.

The U.S.-India Trade Tension Factor

Adding to the pressure is the economic tension with the United States. Former President Donald Trump’s return to the global stage has reignited tariffs, including a 50% import duty on certain Indian exports. This has created additional financial strain on Indian businesses, including those operating in the tech and crypto sectors.

Industry leaders have expressed concern that the combined burden of domestic regulation and global trade headwinds may drive talent and innovation abroad.

A Ray of Hope: COINS Act 2025

Despite the current environment, there may be light at the end of the tunnel. The proposed India COINS Act 2025 has emerged as a potential game-changer.

The legislation aims to provide a clearer and more supportive framework for digital assets. Key provisions include:

• Tax incentives for long-term crypto holders

• Self-custody rights for investors

• Creation of a dedicated regulatory body, the Crypto Asset Regulatory Authority (CARA)

• Adoption of international best practices, such as the EU’s MiCA framework and Singapore’s sandbox model

If passed, the COINS Act could provide much-needed clarity, stabilize the market, and encourage innovation within India's borders.

The Scale of Indian Crypto Holdings

Despite the challenges, Indian crypto adoption remains robust. According to industry reports, Indian investors currently hold nearly 1 million Bitcoins — about 5.1% of the total global supply — making India the second-largest Bitcoin-holding country after the United States.

Interestingly, most of these holdings belong to small, retail investors rather than institutions, indicating grassroots adoption and a strong belief in the long-term value of digital assets.

This widespread ownership demonstrates the resilience of India’s crypto community, even as it faces mounting challenges from the regulatory environment.

Implications for the Future

The recent crackdown is expected to have a dual effect: deterring tax evasion while also shaking investor confidence in the short term. Traders may either reduce their activity or migrate to offshore platforms that do not fall under Indian tax jurisdiction.

However, the unveiling of the COINS Act suggests that the government is also considering a future where digital assets are regulated—but not stifled.

This pivotal moment presents a choice for the country. India can either continue to push crypto activity into the shadows through aggressive taxation and ambiguity or it can bring the sector into the light with transparent and supportive policies.

Conclusion

India's cryptocurrency landscape is undergoing a crucial transformation. On one hand, the government is taking decisive action to enforce tax laws and crack down on undisclosed earnings. On the other hand, proposals like the COINS Act 2025 offer hope for a more balanced approach that fosters innovation while ensuring accountability.

As crypto adoption continues to rise globally, India must decide whether it will be a leader or a bystander in this technological revolution. The decisions made in the coming months will shape the future of digital assets in the country and determine how India is positioned in the global crypto economy.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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