India’s Tax Authorities and RBI Warn on Crypto Risks Before 2026 Budget

Highlights:

• Indian tax teams warn that poor crypto tracking may reduce government revenue.
• FIU and the tax department share data to catch undeclared crypto income early.
• Crypto demand grows in India despite 30% tax and unclear long-term rules.

India’s income tax authorities and the Reserve Bank of India (RBI) have raised concerns about crypto trading. They said poor tracking could reduce tax income as more people buy and sell digital coins. On January 8, media reports said tax officers briefed the parliamentary standing committee on finance. Officials focused on cryptocurrencies and virtual digital assets during the session. They told members that current systems cannot track trades, profits, or ownership accurately.

Cryptocurrency Transfers and Hidden Trades Raise Tax Risks

Officials said crypto transfers cross borders easily and often stay outside bank routes. Wallet IDs do not show who is behind them. Trades done through private channels leave gaps in records. This makes tracking hard and limits action, mainly when trading rises during sharp price changes.

India’s finance officials plan stricter checks on crypto markets, sources said. Focus is on platforms with privacy tools, foreign exchanges, and peer-to-peer trading. Agencies see more risk where proper records are missing.

This collaboration is between the Financial Intelligence Unit and Income Tax Department. They share data on discrepancies between trade reports and declared income. The aim is to catch discrepancies early before they become difficult to trace. Checks also jumped following alerts linked to crypto money laundering. Authorities referred some cases to the Home Ministry for scrutiny. Officials said the risk of crime rises when rules on reporting vary across exchanges and jurisdictions.

🇮🇳 India’s Income Tax Department has flagged “serious risks” around crypto in its presentation to the Parliament Finance Committee, aligning with the RBI’s cautious stance.

The focus is on anonymity, offshore activity, and tax enforcement. pic.twitter.com/f4CeM1c1pm

— BlockchainedIndia (@blockchainedind) January 8, 2026

 

The Income Tax Department flagged issues at various centralised exchanges. Reviews showed unusual leverage and possible insider trading. Officials said these practices affect prices and mask true profits from tax records.

Currently, India already has one of the highest crypto taxes. Traders pay 30% on gains, and 1% TDS on each trade, but long-term rules are still unclear, leaving traders unsure about future treatment. Despite this, crypto demand in India continues to rise. As a result, some global exchanges, including Coinbase, are considering local operations. High retail interest is driving growth even under strict tax rules.

Union Budget Strengthens Crypto Tax Audits and Reporting

The Union Budget last year gave more powers to authorities over digital assets. Undisclosed crypto gains will fall under Section 158B of the Income Tax Act. Officials can scrutinize records from the last 48 months. Penalties can go up to 70% of the unpaid tax. Officials said the rule is about hidden income and not about normal mistakes. If disclosures are incomplete, older records of traders will attract closer scrutiny.

Tax teams had said in July last year that they would adopt artificial intelligence and share data globally under the Crypto Asset Reporting Framework for matching the exchange-reported data with the individual tax returns. According to the reporting plan, mismatches above ₹1 lac or around $1,200 may trigger notices. The authorities intend to cross-check tax deducted at source figures shared by exchanges. The system is expected to reduce underreporting once it’s fully active.

🚨🇮🇳BREAKING: INDIA TO WATCH CRYPTO AND CLOUD STORAGE MORE CLOSELY

India’s tax department (CBDT) is stepping up checks on crypto, online banking, and cloud storage to stop tax evasion. Starting April 1, 2026, data from wallets and cloud accounts can be used as proof during tax… pic.twitter.com/CXdxV1W21H

— Crypto Jargon (@Crypto_Jargon) July 24, 2025