The Indian government has doubled down on its scrutiny of cryptocurrency investments, allowing the Income Tax Department to probe undeclared virtual digital assets (VDA) for up to six assessment years ahead of a search being conducted, among other powers.
Simply, if a person has been hiding their crypto income from tax authorities, then they are in for a surprise.
With the latest changes introduced under the Finance (No. 2) Act, 2024, crypto transactions are now being treated just like money, bullion, and jewelry when it comes to tax assessments. If the Income Tax Department conducts a search on or after September 1, 2024, they can now go back and assess any undeclared crypto income from the previous six years.
The Income Tax Department can now undertake searches for undisclosed virtual digital assets (VDAs) such as cryptocurrencies while inspecting the accounts for tax purposes. They can make assessments of such hidden assets going back as much as six years prior to the year of the search.
VDAs are being added to the list of relevant assets alongside cash, gold, and jewelry, and the law is being updated accordingly, and will officially take effect on February 1, 2025.
This means that if a person has been earning through crypto but hasn’t reported it, the tax authorities have more power than ever to investigate and take action. Any ongoing tax assessments or reassessments related to a block period will be put on hold during a search, but if a case gets annulled in an appeal, it can be revived.
Since blockchain transactions can be tracked, authorities are now in a stronger position to identify undeclared assets. Those who haven’t been compliant might want to take action before the tax department comes knocking. With the rules getting stricter, staying informed and ensuring tax compliance is more important than ever.
Also Read: India Defines Crypto, Tax Reporting Mandatory from 2026
