Indian financial authorities have once again raised concerns about cryptocurrency activity, warning that it poses growing challenges for tax compliance and enforcement.
According to a report by The Times of India on Thursday, the Income Tax Department (ITD), operating under the Central Board of Direct Taxes (CBDT), highlighted significant risks tied to crypto transactions during a parliamentary standing committee on finance.
The concerns were raised at a Wednesday meeting involving several agencies — including the Financial Intelligence Unit (FIU), the Department of Revenue, and the CBDT — as part of discussions around a report titled “A Study on Virtual Digital Assets (VDAs) and Way Forward.”
ITD officials reportedly underscored the difficulties created by offshore crypto exchanges, private wallets, and decentralized finance (DeFi) platforms, all of which make it harder to identify and assess taxable income.
Cross-border activity complicates enforcement
During the meeting, the ITD also warned that crypto’s “anonymous, borderless, and near-instant” nature enables value transfers without relying on regulated financial intermediaries.
The department further pointed to jurisdictional hurdles linked to offshore VDA activity, noting that transactions spanning multiple countries make tracking funds and identifying asset holders for tax purposes “virtually impossible.”
“While there have been some recent efforts to improve information sharing, significant challenges remain, limiting tax authorities’ ability to accurately assess transactions and reconstruct transaction chains,” the report said.
India imposes a flat 30% tax on crypto gains
India applies a flat 30% tax on all profits from crypto-related activity, along with a 1% tax deducted at source (TDS) on every transaction, regardless of whether it results in a gain or a loss.
Although cryptocurrency trading is legally permitted under this stringent tax framework — and the country approved the return of major US exchange Coinbase in 2025 — the Indian government’s broader approach to crypto continues to be cautious and uneven.
Local industry executives have previously said that India’s crypto ecosystem is at a critical juncture, with adoption accelerating and the Financial Intelligence Unit approving 49 crypto exchanges during the 2024–2025 fiscal year.
However, they argue the existing tax regime continues to pose obstacles. Because losses on crypto transactions are not allowed to be offset, the framework creates “friction rather than fairness,” CoinSwitch co-founder Ashish Singhal reportedly said.
