India Leverages AI to Strengthen Crypto Tax Enforcement, Recovers ₹437 Crore

Stock Markets | Published: July 28, 2025 | Updated: July 29, 2025

India has taken a major step forward in crypto tax compliance by harnessing the power of artificial intelligence. The Income Tax Department recently reported to Parliament that it has recovered ₹437 crore from cryptocurrency-related transactions by utilizing advanced AI systems and data analytics to uncover non-compliance.

AI-Fueled Enforcement Tightens Tax Oversight

India’s tax authorities, particularly the Central Board of Direct Taxes (CBDT), have incorporated AI and digital forensic tools to better track and analyze transactions involving virtual digital assets (VDAs). By cross-referencing Tax Deducted at Source (TDS) records from exchanges with individual filings, the system is able to pinpoint mismatches, inconsistencies, and suspicious trading patterns.

In the financial year 2022–2023 alone, this tech-powered strategy enabled the collection of ₹437 crore in taxes from crypto transactions—demonstrating the effectiveness of AI in uncovering previously undetected income.

Global Alignment Through Crypto-Asset Reporting Framework (CARF)

In addition to domestic enforcement tools, India has adopted the Crypto-Asset Reporting Framework (CARF), an initiative from the Organisation for Economic Co-operation and Development (OECD). CARF facilitates automatic sharing of crypto-related data between nations, aiming to curb cross-border tax evasion.

India’s adaptation of this framework ensures direct reporting between exchanges and the Income Tax Department, closing gaps that once allowed digital asset transfers to escape detection. This move also aligns India’s tax policies with global standards, fostering a more transparent international digital economy.

Improving Visibility Into Wallets and Transactions

One of the historical challenges of taxing digital assets has been the anonymity of crypto wallets. However, Indian regulators are now investing in technology capable of identifying peer-to-peer transfers, linking wallet addresses to verified user identities, and matching those with transaction histories and KYC (Know Your Customer) data.

These advancements reduce dependency on voluntary self-reporting, allowing tax officials to automatically identify concealed or underreported crypto earnings through real-time monitoring and AI-driven pattern recognition.

Building a Future-Ready Crypto Compliance Framework

India’s regulatory approach to digital assets is evolving rapidly. After imposing a 30% flat tax on crypto income and a 1% TDS on every transaction in 2022, the focus in 2025 has shifted toward robust enforcement and compliance.

By integrating AI and international cooperation frameworks like CARF, India is making it increasingly difficult for crypto users to bypass taxation. This tech-enabled crackdown signals the government’s long-term commitment to transparency, accountability, and modernization in the digital finance space.