India’s Tax Authorities and Central Bank Raise Crypto Concerns

Ahead of India’s February 2026 Union Budget, tax authorities raised concerns over crypto assets, aligning with the Reserve Bank of India (RBI).

The warning discusses the enforcement challenges faced by the authorities that could undermine the government’s ability to monitor and tax crypto activity.

Indian Tax Authorities Raise Concerns of Crypto Risks

On January 8, local media outlets reported that tax officials have briefed the parliamentary standing committee on finance on the risks posed by cryptocurrencies and other virtual digital assets.

Officials highlighted difficulties in tracking crypto transactions, citing features such as borderless transfers, pseudonymous wallet addresses, and activity conducted outside regulated banking systems.

They noted that these characteristics create significant gaps in regulatory oversight and complicate tax enforcement efforts.

India’s Finance Ministry is seeking to tighten oversight of the cryptocurrency sector, with a particular focus on decentralised platforms, privacy-focused systems, and offshore exchanges, according to a source familiar with the matter.

The source mentioned that the Financial Intelligence Unit (FIU) and the Income Tax Department are aligned in their approach.

FIU-registered exchanges are also expected to face increased scrutiny following reports of crypto-related laundering, which have now been taken up by the Ministry of Home Affairs for detailed investigation.

The income tax department has flagged irregularities at several centralised exchanges. They have raised concerns over excessive leverage and other instances of insider trading.

India Remains a Nation With the Highest Crypto Tax

India remains one of the countries with the highest crypto taxes. Due to the absence of a clear regulatory framework, crypto traders face a flat 30% tax and another 1% TDS.

Despite this, crypto exchanges like Coinbase have considered setting up operations here due to rising demand.

Under India’s 2025 Union Budget, undisclosed cryptocurrency gains were brought under Section 158B of the Income Tax Act.

This allowed authorities to conduct retrospective audits for up to 48 months and impose penalties of up to 70%.

In July 2025, tax authorities also announced plans to deploy artificial intelligence and global data-sharing mechanisms under the Crypto-Asset Reporting Framework.

The initiative is aimed at cross-verifying TDS data reported by exchanges against individual income tax filings, with notices to be issued when discrepancies exceed ₹1 lac (about $1,200).

Amid a rejection of decentralized digital assets, India is instead focusing on the development of an “RBI-guaranteed” digital currency.

Union Minister of Commerce and Industry Piyush Goyal said in October that the government’s heavy taxation of cryptocurrencies is aimed at discouraging adoption.

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