Radhika Parashar
- India is yet to get a comprehensive regulatory framework to oversee the crypto sector
- The country is working with the FATF and the G20 group to formulate internationally uniform crypto rules
- India’s crypto insiders believe while the authorities plan to rid the sector of exploiters, these steps could lead to a talent exodus
India’s central board of direct taxes (CBDT) is looking to ramp up its oversight on crypto-based tax evasions. Ravi Agrawal, the chairperson of the CBDT has outlined how the country is deploying Artificial Intelligence (AI) tools to crack down on those exploiting crypto to illegally move funds around.
Agarwal, in a recent interview with The Economic Times said that the new income tax law is likely to be approved by the parliament during the ongoing monsoon session in New Delhi.
He highlighted that the idea of using AI for financial clarity is aimed at identifying inconsistencies in tax reporting in alignment with India’s new tax code, that was proposed by finance minister Nirmala Sitharaman earlier this year
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Crypto wallets to be under scanner
Starting April next year, the Indian authorities will start considering data traces from cloud storages and crypto wallets as proof to launch tax raids on entities suspected of evading taxes.
The CBDT chief reportedly said that the agency is already using AI to scan data of over six billion transactions annually. Agrawal said these tools allows the agency to detect differences on what is being reported and how it aligns with data collected by exchanges.
In the coming times, India is set to ramp up its coordination with the Paris-based Financial Action Task Force (FATF) and other nations of the G20 group to establish internationally workable rules around cryptocurrencies.
India’s crypto circle divided on opinion
At present, India lacks a concrete set of rules to oversee the digital assets industry. Crypto incomes are taxed by 30 percent in India and a TDS of one percent is cut on each transactions. Despite multiple requests on tax revisions from the crypto community, the finance ministry stayed firm on its stance.
Stakeholders of India’s crypto circle has welcomed the government’s steps that seemingly aim to rid the sector of exploiters and make it safer for broader exploration.
Speaking to CoinHeadline, Mudrex CEO and co-founder Edul Patel said, “This approach could strengthen compliance and help identify and eliminate bad actors from the ecosystem. By aligning with global regulatory bodies like the G20 and FATF, India can also contribute meaningfully to shaping global crypto tax standards.”
Many industry insiders believe that the use of AI to clean up the crypto ecosystem could prove to be an efficient and effective approach to improve the overall financial and crypto ecosystem. The impact this step could have on the crypto exchange businesses, however, remains a matter of analysis for crypto insiders.
“It is important to note that India is committed to implementing CARF by 2027 and is already making progress with its domestic tax regulations. This forward-looking step underlines India’s dedication to deal with offshore tax evasion and to ensure that activities related to digital assets fall within the purview of Indian tax laws. We would like to wait and watch how this move may impact crypto exchanges,” Saravanan Pandian, the CEO and Founder of the KoinBX exchange told CoinHeadlines.
Some, meanwhile, have called India’s plan to gain an access into crypto wallet data a tad “aggressive”, that could slow down the growth momentum for the ecosystem in the country that houses the world’s largest population as well as large portion of the global Web3 developers.
“India’s aggressive AI-driven crypto tax scrutiny could push homegrown blockchain talent to friendlier shores, stifling innovation locally. A balanced regulatory approach is crucial to retain the country’s brightest minds,” said Sudhakar Lakshmanaraja Founder at Digital South Trust which is a web3 skill development non-profit organization.
For now, a crypto discussion paper from the finance ministry is due in India, which will bring more clarity to India’s stance on crypto. Meanwhile, crypto firms looking to set up shops in the country need to register with India’s Financial Intelligence Unit (FIU) and comply with KYC, anti money laundering, and counter terror financing regulations.
