The tax authorities of India intensify their concentration on cryptocurrency transactions and undeclared assets, signaling a larger thrust of regulatory clarity and compliance in the space of volatile digital assets. The Central Council for Direct Taxes (CBDT) has launched official consultations with cryptocurrency exchanges and industry stakeholders, aimed at refining the existing tax framework and taking up persistent challenges such as liquidity and ambiguity in regulatory monitoring. Over the past two years, the Crypto-related Tax Recovements have generated approximately 705 income, while the audits have discovered an additional 630 crore of non-disclosed income from virtual digital assets (VDAS), highlighting the extent of non-compliance (1).
As part of its repression, the CBDT issued opinions to more than 44,000 cryptocurrency traders for having omitted to disclose their revenues from digital assets, encouraging voluntary compliance through its NUDGE campaign. The Department takes advantage of advanced technological tools such as Project Insight and the non-filter monitoring system (NMS) to follow the differences between tax declarations and TDS exchanges. These measures reflect an approach based on data to detect escape and improve transparency in a sector subject to speculative and opaque behavior (1).
Current tax policies for cryptocurrencies in India remain complex and inflexible. Under article 115BBH of the income tax law, capital gains in crypto negotiation are taxed at a flat rate of 30%, without any loss compensation allowance. In addition, a 1% tax deducted from the source (TDS) applies to each transaction on a specified threshold, contributing to the reduction of liquidity on interior exchanges. Industry participants argue that these rates are excessively high and discourage long -term investments. Many traders have therefore migrated abroad, where more favorable regulatory environments exist (1).
To respond to these concerns, the CBDT proposed potential reforms, including a reduction in the rate of TDS to 0.1% and 0.5%, as well as the introduction of a framework allowing the postponement and compensation of losses related to the crypto. These adjustments aim to align the tax regime for India cryptography with global standards while preserving tax revenue. There is also an increasing consensus among the industry players according to which a dedicated regulatory body should supervise the sector to eliminate the jurisdictional overlaps currently managed by the Bank of India reserve (RBI), the securities and the exchanges of India (SEBI) and the Ministry of Electronics and Information Technologies (1).
Beyond tax considerations, wider regulatory uncertainties persist, including the ambiguous definitions of cryptographic derivatives and unclear directives under the law on the management of foreign exchanges (FEMA). These problems complicate compliance for investors and exchanges, contributing to the reluctance of banks to support activities related to crypto. In response, the government has expressed its interest in a unified legal framework which could clearly define the VDAs, establish coherent operational standards and facilitate cross-border transactions within the framework of the crypto-west reporting framework (CARF) (4).
With India’s participation in global discussions on cryptography regulations, the CBDT approach seems to balance the need for innovation with the tax imperative. A well -structured regulatory environment could attract foreign investments, create a job in the web3 sector and solidify the position of India as a regional center for the development of digital assets. However, the success of these reforms will depend on the government’s ability to strike a delicate balance between regulatory rigor and policies adapted to investors.
Source: (1) CBDT’s proposals for crypto regulation in india ((2) cryptocurrency in india | latest news by cointelegraph ((3) gst on supply of crypto or digital assets ((4) India Eyes Clearer Crypto Tax Rules with Cbdt Move ((5) Is crypto legal in USA? Compliance in 2025 (
