India Enforces Retroactive Crypto Tax Policy from February 2025

The Indian government will introduce new tax laws in 2025 targeting undeclared cryptocurrency gains. The proposed tax legislation introduces a 70% penalty tax

India will introduce new tax laws in 2025 that will target undeclared cryptocurrency gains. A 70% penalty tax will be levied on any undisclosed profit earnings, and the new legislation will apply to hidden financial gains that were accrued over the previous 48 months.

The development was announced during the 2025 federal budget announcement by Finance Minister Nirmala Sitharaman. The announcement included a section that pertained to the Income Tax Act, which now embraces Cryptocurrency as a taxable asset, as defined in section 158B.

A new amendment will demand crypto holders to evaluate their unreported profit gains in the same manner that they assess traditional assets, including currency, jewelry and bullion, for the purpose of taxation.

The new legislation also includes an official classification of Virtual Digital Assets (VDA) within the Income Tax Act through Section 2(47A), which contains an existing definition of crypto assets. Any organization that deals with crypto transactions will be required to file reports as per Section 285BAA. The initiative aims to ensure that crypto exchanges are maintaining proper records and meeting tax regulations.

The government has taken a serious stance against cryptocurrency profits that remain unreported for taxation purposes. Any crypto owner should be aware that a failure to report previously undiscovered crypto transactions may lead to a 70% tax penalty from the authorities.

The government will be imposing this tax on cryptocurrency gains that were accrued over the previous 48 months prior to the assessment year. Any income that is revealed through revised Income Tax Returns (ITRs) will be taxed at a total amount, including penalties and interest at 70%, as per the official declaration.

India Enforces Retroactive Crypto Tax Policy from February 2025

The proposed assessment date for the taxation policy begins on February 1, 2025, and will be applied retroactively.

The government’s tax rule change comes amid increasing efforts to financially monitor cryptocurrencies and curb illicit tax activities within India’s crypto market.

At the end of December 2024, India’s Minister of State for Finance Pankaj Chaudhary reported the findings of unpaid Goods and Services Taxes (GST) that amounted to 824 crore Indian rupees ($97 million) from several cryptocurrency exchanges.

The discovery was made after government authorities undertook a major tax enforcement action in August of 2024. At the time, Binance received a tax demand of 722 crore Indian rupees ($85 million) from Indian law enforcement agencies, operating as one of the world’s largest cryptocurrency exchanges.

These recent tax modifications are part of a broader initiative to establish enhanced Indian government control over cryptocurrency transaction activities. Planned compliance by Bitcoin investors and cryptocurrency exchanges will be mandatory to avoid hefty financial fines.

The future of digital assets may include increasing taxation under additional regulatory oversight from the authorities.