India Tax Dept Flags Major Crypto Risks to Parliament

India’s Income Tax Department has presented significant concerns about virtual digital assets to the parliamentary standing committee on finance. The department outlined enforcement challenges and regulatory gaps that make cryptocurrency oversight particularly difficult.

The presentation, delivered on Wednesday, highlighted how anonymous and borderless transactions enable funds to move without regulated financial intermediaries. Tax authorities emphasized that near-instant value transfers across jurisdictions complicate their ability to track taxable income.

BREAKING: 🇮🇳 Income Tax Department flags crypto as risky, joins RBI in opposing wider use in India. pic.twitter.com/0UacbNPlF8

— Crypto India (@CryptooIndia) January 8, 2026

This marks another institutional voice joining the Reserve Bank of India in opposing broader crypto adoption. The central bank has repeatedly warned about the lack of underlying assets backing cryptocurrencies, calling them risky investments.

Meanwhile, India’s Financial Intelligence Unit confirmed that 49 cryptocurrency exchanges now operate as registered reporting entities. The registration milestone comes as the government maintains its measured approach to full crypto regulation.

India Tax Officials Face Mounting Enforcement Hurdles

The tax department identified offshore exchanges, private wallets, and decentralized platforms as major obstacles. These structures make it extremely difficult for authorities to detect taxable income from crypto activities.

Beneficial ownership remains opaque in many cases, according to the presentation. Tax officials struggle to identify who actually controls cryptocurrency holdings across various platforms and wallet types.

Jurisdictional limitations create additional challenges when VDA activity spans multiple countries. Authorities have little ability to verify cross-border flows or recover tax dues from overseas entities.

Although recent months have seen progress on international information sharing, verification remains problematic. Tax officials cannot properly assess transactions or reconstruct complete transaction chains.

The department noted that issuing summons to overseas crypto platforms presents significant difficulties. Many exchanges operate entirely outside Indian regulatory reach.

TDS collection from foreign platforms poses another enforcement headache. Several exchanges remain unregistered with the Financial Intelligence Unit entirely.

Regulatory Framework Takes Shape

Indian tax authorities have implemented several safeguards to track crypto beneficiaries. TDS requirements now apply to cryptocurrency transactions to create a paper trail.

Registration mandates for entities dealing in crypto and other VDAs have been established. The FIU’s 2024-25 fiscal year report confirms 49 exchanges now comply with anti-money laundering requirements.

BREAKING: 🇮🇳 49 crypto exchanges registered with Financial Intelligence Unit (FIU) in FY 2024–25

– 45 India-based, 4 offshore platforms

– ₹28 crore in penalties imposed on non-compliant exchanges during the year. pic.twitter.com/mrPwsYgqpf

— Crypto India (@CryptooIndia) January 6, 2026

Of the registered entities, 45 are domestically based Indian platforms. Four offshore exchanges completed the rigorous compliance process to operate legally in India.

All registered platforms must actively monitor and report suspicious financial activity. Federal authorities receive these reports as part of the Prevention of Money Laundering Act framework.

The registration process, which began in early 2023, provides the government with detailed oversight capabilities. Exchanges must determine beneficial ownership of wallets under current rules.

Tracking transfers between hosted and unhosted addresses is now mandatory for registered platforms. This requirement aims to close transparency gaps in crypto transactions.

Enforcement agencies remain wary of VDAs due to money laundering and terror financing risks. These concerns have been raised consistently by multiple government bodies.

India remains among countries reluctant to fully embrace cryptocurrency and stablecoins. Intense lobbying and pressure from some governments have not changed this cautious stance.

The parliamentary committee heard these concerns as part of ongoing deliberations on digital asset policy. No immediate legislative changes were announced following the presentation.

Tax authorities continue building infrastructure to monitor the growing crypto sector. The gap between registered and unregistered platforms remains a key concern.

International cooperation on crypto regulation continues to evolve slowly. Indian officials stress the need for stronger cross-border enforcement mechanisms.