- Trending
- Comments
- Latest
Indian tax officials warned a parliamentary committee that offshore crypto exchanges, private wallets, and decentralized finance platforms are making it “virtually impossible” to enforce the country’s 30% tax on virtual digital assets.
During a finance committee meeting this week, representatives from the Income Tax Department and Central Board of Direct Taxes highlighted how anonymous, cross-border crypto transactions complicate compliance and allow taxable gains to go unreported despite the government’s strict tax regime.
Officials stressed that “anonymous, borderless, and near-instant” value transfers via crypto allow funds to move without regulated intermediaries, raising the potential for unreported income under India’s India crypto tax rules.
With multiple jurisdictions involved, tracking transactions and identifying holders for tax purposes is “virtually impossible,” the ITD noted.
The tax framework treats cryptocurrencies as virtual digital assets (VDAs) under Section 115BBH of the Income Tax Act, which imposes a 30% flat tax on gains plus applicable surcharge and cess. Additionally, a 1% Tax Deducted at Source (TDS) applies to VDA transfers to support traceability and compliance.
Under the current regime, all VDA gains whether long-term or short-term are subject to the India crypto tax, with no allowance for losses. The 1% TDS requirement applies to most transfers, including those on exchanges that collect and remit the tax on behalf of users.
A dedicated “Schedule VDA” in income tax returns requires separate disclosure of crypto gains, integrating crypto reporting into mainstream compliance.
“Although there have been efforts on information sharing, it remains difficult, inhibiting tax officials’ ability to reconstruct transaction chains,” the ITD noted.
While India allows crypto trading under regulation, ITD warnings reflect broader caution. The India crypto tax regime applies even as adoption rises and major international exchanges, including Coinbase, resume operations domestically.
Local executives describe the tax system as creating “friction rather than fairness,” because losses on crypto transactions cannot offset gains.
“The 30% tax combined with TDS demonstrates India’s intent to capture crypto revenue but also places a compliance burden on investors,” said a senior tax attorney involved in digital asset compliance.
India’s approach remains cautious as cryptos are recognized as VDAs, not legal tender, and regulators emphasize systemic and tax compliance risks.
Enforcement under the India crypto tax framework requires transparent reporting, meticulous transaction records, and awareness of obligations under multiple tax provisions.
“Tax authorities are committed to closing compliance gaps and ensuring digital asset gains are reported,” said a CBDT official, signaling stricter enforcement as adoption grows.
Despite regulatory pressures, investor interest in crypto remains strong, particularly among tech-savvy and high-net-worth individuals who can maintain detailed transaction records.
Many traders are increasingly leveraging software solutions and exchange-provided reports to comply with the India crypto tax framework, suggesting a growing market for compliance tools and tax advisory services.
Industry analysts note that such adaptation could reduce enforcement gaps over time.
“Investors are learning to navigate the India crypto tax landscape,” said a digital asset strategist focused on emerging markets. “The key challenge is ensuring small investors and retail participants are equally aware of obligations, which will determine the long-term health of India’s VDA market.”
The ITD and CBDT are reportedly reviewing proposals to enhance reporting requirements, strengthen exchange cooperation, and adopt automated transaction-monitoring tools.
Some officials have suggested aligning India’s crypto tax framework with global practices, including FATF guidelines, to improve traceability of cross-border flows.
“India is observing international trends in crypto taxation closely,” noted a senior compliance consultant. “We anticipate tighter integration of technology and policy to ensure that VDAs do not escape the tax net.”
As cryptocurrency adoption continues to rise domestically, these measures indicate a trajectory toward more structured oversight under the India crypto tax regime, balancing investor innovation with government enforcement needs.
