India is stepping up tax enforcement on crypto. On January 7, 2026, the Income Tax Department told Parliament’s Finance Committee that it shares the Reserve Bank of India’s view of virtual assets as a high-risk area, with bitcoin and similar assets seen as making it easier to obscure the movement of funds.
The shift is no longer about observation. It is now about compliance checks and information gathering. Tax officials argued that the borderless nature of crypto makes ownership tracking and tax collection much harder than in the banking system, where transfers usually leave a clearer record. Private wallets and overseas apps are a central concern because they allow value to move quickly across jurisdictions.
Parliament briefing shows a coordinated policy stance
At the committee meeting, the Income Tax Department and the RBI presented a closely aligned view of crypto risk. The concern goes beyond price volatility. Officials said the decentralized structure of bitcoin makes unpaid tax recovery “virtually impossible” without cooperation from other countries, which explains why New Delhi is focusing on tighter domestic controls instead of chasing every transfer.
That approach points to containment. Rather than relying only on after-the-fact enforcement, the government is keeping the market inside a narrow and costly compliance framework that is easier to supervise.
Data from 49 registered exchanges is now part of tax checks
Over the final weeks of 2025 and into early 2026, many Indian crypto users received official notices under Section 133(6). These requests are formal demands for information, not routine reminders. The tax office is using records from 49 exchanges registered with the Financial Intelligence Unit (FIU) to review user activity.
One major checkpoint is the 1% TDS deducted on each trade. Authorities are matching that data against annual income disclosures. If reported figures do not align, taxpayers may be asked to explain the gap. For users trading on large compliant domestic platforms, that suggests the government may already have substantial transaction data available.
30% tax and no loss offset remain the main burden
India’s existing tax structure continues to impose heavy costs on crypto trading. Profits are taxed at a flat 30%, and losses cannot be used to offset gains. The example described in the source is simple: if a trader makes a profit on Bitcoin but loses an equal amount on Ethereum, the Bitcoin gain is still taxed, while the Ethereum loss provides no relief.
Companies dealing in digital assets are also required to register with the government. The policy is framed as a transparency measure, but it also adds friction for both firms and users. Crypto trading remains possible in India, though the market now operates under sharper tax scrutiny, tighter reporting expectations, and a much higher compliance cost.