The Indian tax authority is leveraging artificial intelligence (AI) and advanced technologies to detect and prevent tax evasion in the cryptocurrency sector, achieving notable results.
In an interview with the Economic Times, Ravi Agrawal, Chairman of the Central Board of Direct Taxes (CBDT), revealed that India is implementing AI and international data-sharing agreements to crack down on cryptocurrency tax evasion. The Indian government has officially acknowledged the use of AI and machine learning tools to identify anomalies in transaction patterns, alongside data analytics platforms like the Non-Filer Monitoring System (NMS) and the Insight Project, which aggregate information to flag inconsistencies.
Thanks to the application of AI technology, the Income Tax Department collected 437 crore rupees from virtual digital asset (VDA) income alone in the financial year 2022-2023. This figure illustrates the clear effectiveness of applying technology in tax management and reflects the Indian government’s determination to enhance tax compliance in the digital asset sector.
To improve transparency, the Indian government has also launched the Cryptocurrency Asset Reporting Framework (CARF) to ensure automatic sharing of tax-related information between countries. Saravanan Pandian, CEO and founder of KoinBX, shared with Decrypt: “The goal is to include cryptocurrency transactions in international tax agreements for consistency among nations.”
CA Sonu Jain, Director of Risk Management and Compliance at 9Point Capital, confirmed that India is ramping up measures to enhance transparency through new tools and technologies. He emphasized, “India is preparing for a future where wallet visibility and automatic data exchanges become standard in an industry long affected by anonymity.”
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To bolster compliance and enforcement, authorities are investing in specialized training programs to equip officials with skills in digital forensics.
By 2025, the Indian government aims to create a robust regulatory and tax infrastructure around virtual digital assets. Following the implementation of a fixed 30% tax rate on cryptocurrency income and 1% TDS on transactions in 2022, authorities are now shifting their focus to enforcement.
With significant advancements in tax, transparency, consumer protection, asset reporting, and cross-border transactions, India is demonstrating enhanced measures to trace and limit cryptocurrency tax evasion.
The recognition of AI’s utility in the tax sector indicates that India is building a comprehensive and modern digital asset management system, aiming to create a transparent and accountable environment for the cryptocurrency market. This is seen as a crucial step in shaping the legal framework for digital assets in one of the world’s largest potential markets.
