The department has begun sending out intimation emails to such taxpayers, seeking explanations for unreported income and foreign assets.
“Investigation has revealed that a large number of professionals in IT, education, auditors and various consultants were working for multiple overseas clients and received payments in crypto,” a senior official told ET, but declined to disclose the number of such people.
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In several cases, individuals working in technology and consulting sectors allegedly received part of their compensation in Stablecoins or other cryptocurrencies that were parked in wallets linked with accounts outside India, in low-tax jurisdictions, sources said.
The probe also flagged residents investing in overseas crypto exchange-traded funds (ETFs) through offshore brokerage accounts without reporting holdings or gains.
The findings emerged from a data-analytics exercise using information from foreign financial institutions, crypto-exchange reporting and global tax-information sharing frameworks.The exercise is a part of broader efforts to monitor new forms of cross-border compensation and digital-asset investments.
Digital Trail
As remote work expands across borders, tax authorities are increasingly examining cases where employees based in India take on side assignments for overseas clients and receive payment in crypto. With global information-sharing arrangements expanding, undisclosed overseas income-whether paid in fiat or crypto-is becoming easier for authorities to detect.
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The department is increasingly using blockchain analytics tools to trace digital asset movements and identify points where crypto is converted into fiat currency.
Officials said moonlighting is not a new trend and similar cases were noticed post Covid. But this time payments have been made in crypto to avoid reporting.
“Data matching is now sophisticated enough to track digital asset flows linked to Indian residents,” the official quoted above said, adding the department is focusing on voluntary compliance before moving to enforcement action.
Under Indian laws, residents are taxed on their global income, regardless of where it is earned or how it is paid. That includes income received in digital assets such as cryptocurrencies.
Since the government introduced a dedicated tax regime for virtual digital assets in 2022, gains from such assets are taxed at a flat 30%, and transactions through certain platforms attract a 1% tax deducted at source. Undisclosed foreign assets can attract penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act.