$104M in Unreported Crypto Gains Caught by India's Automated Tax Enforcement

India's tax authority has made a significant move in its battle against undeclared cryptocurrency gains. With a new automated system in place, officials have identified over $104 million in unreported income, according to a report from KuCoin.

The system relies on exchanges, custodians, and wallet providers sending user-level transaction data directly to the Income Tax Department. Automated systems then cross-check these reports against taxpayer filings under Schedule VDA, which deals with virtual digital asset gains.

Indian law currently taxes VDA gains at a flat 30 percent rate, with an additional 1 percent tax deducted at source (TDS) on eligible transfers. The new system's ability to verify individual trade-level activity has raised concerns that traders may shift their activities to decentralized exchanges or non-custodial rails.

The impact of this enforcement pivot is already being felt, with some Indian traders opting for global exchanges with Indian-facing interfaces and peer-to-peer premium markets absorbing some of the flow. The tax authority's next move will be crucial in determining how this new visibility is used to tighten rates further or introduce sector-specific carve-outs.