India’s tax authorities have voiced deep concerns regarding crypto regulations in India before the Parliament’s finance committee. During a presentation this Wednesday, the tax department warned about the technical difficulty of tracking virtual digital assets effectively.
Authorities cited that anonymous transfers and the use of offshore platforms make detecting taxable income nearly impossible for the government. These statements come at a critical time as the country prepares for the presentation of the Union Budget on February 1.
Likewise, officials highlighted that the inherent features of this technology, such as borderless transfers and pseudonymous addresses, create massive enforcement gaps. On the other hand, the Financial Intelligence Unit (FIU) and the Tax Department agree on the need to curb decentralized systems and financial privacy.
It has been reported that FIU-registered exchanges will also face rigorous scrutiny due to potential money laundering reports. In this way, the Ministry of Home Affairs has initiated detailed investigations into irregularities such as the misuse of customer funds.
Therefore, the landscape of crypto regulations in India reflects a growing institutional discomfort toward privately issued digital assets. Currently, Indian traders are subject to a flat 30% tax on gains and a 1% tax deducted at source (TDS).
Despite this heavy tax burden, the country still lacks a clear legal framework that provides legal certainty for users. Raj Kapoor, head of the India Blockchain Alliance, noted that this approach creates a climate of fear without offering real protection to the local investor.
Will Artificial Intelligence succeed in detecting tax evasion in the crypto sector?
In addition, the Indian government plans to use advanced Artificial Intelligence tools to cross-match TDS data with income tax returns. This measure is part of the Crypto-Asset Reporting Framework, designed to automatically detect discrepancies exceeding 1,200 dollars for individuals.
On the other hand, the priority of the Reserve Bank of India (RBI) remains the implementation of a sovereign digital cryptocurrency guaranteed by the state. Piyush Goyal, Minister of Commerce and Industry, stated that high taxation seeks to prevent citizens from getting stuck in unbacked assets.
Nevertheless, retrospective audits of up to 48 months and penalties of up to 70% under Section 158B complicate the commercial landscape. There is also a risk that the lack of a parallel regulatory pathway will drive talent and capital flight offshore.
In this way, India could be relegated to being a mere tax collector rather than a technological benchmark. The sector cautiously awaits the speech from Finance Minister Nirmala Sitharaman in the coming weeks. The sustainability of local innovation depends on a balance between fiscal control and development promotion.
Is Sunday, February 1, the definitive date for the new tax scheme?
Therefore, the proposed date for the 2026-27 Budget remains February 1, despite it being a Sunday. The regulatory uncertainty continues to weigh on the ecosystem of virtual assets while authorities toughen their surveillance rhetoric.
Hence, the implementation of international data-sharing agreements will be fundamental for controlling cross-border operations this year. Absolute transparency has become the minimum requirement demanded by the Central Board of Direct Taxes (CBDT) for operating.
Finally, the current status of crypto regulations in India underlines a phase of unprecedented institutional tightening. Nevertheless, the cryptographic community remains hopeful that the discussion paper on digital assets will bring some clarity soon.
The success of the country’s economic policy will depend on its ability to integrate digital finance safely and fairly. Meanwhile, investors must prepare for an environment of high supervision and strict compliance throughout the fiscal year.
