Financial authorities in India have once more raised concerns about cryptocurrency transactions, warning that they may complicate tax enforcement.
India's Income Tax Department (ITD), which operates under the Central Board of Direct Taxes (CBDT), highlighted major risks related to crypto activities during a parliamentary standing committee on finance, The Times of India reported on Thursday.
The warning got here during a parliamentary committee meeting on Wednesday involving several agencies, including the Financial Intelligence Unit (FIU), the Ministry of Finance and the CBDT, which discussed the report “A Study on Virtual Digital Assets (VDAs) and Way Forward”.
The ITD highlighted the challenges posed by offshore exchanges, private wallets and decentralized finance (DeFi) instruments that complicate the determination of taxable income.
The involvement of multiple jurisdictions makes tax enforcement difficult
At the committee meeting, ITD officials reportedly noted that “anonymous, borderless and near-instantaneous” value transfers using crypto could allow one to maneuver funds without regulated financial intermediaries.
The authority also pointed to legal challenges arising from offshore VDA activity. Because multiple jurisdictions are involved, it’s “virtually not possible” to trace transactions and discover holders for tax purposes, the ITD said.
Source: BlockchainedIndia
“Although efforts to share information have been made in recent months, it stays difficult and hinders tax officials' ability to properly assess and reconstruct transaction chains,” the report said.
India imposes a flat 30% tax on crypto profits
India imposes a flat 30% tax on all profits from crypto asset activities, in addition to a 1% withholding tax (TDS) levied on all transfers, no matter whether or not they are profitable or not.
While India officially allows cryptocurrency trading under this high tax regime and approves the return of major US exchange Coinbase in 2025, the federal government's overall stance on cryptocurrencies stays cautious and mixed.
Source: Sumit Gupta
Local executives have previously noted that India's crypto ecosystem is at a vital stage with adoption increasing and the FIU approving 49 crypto exchanges within the 2024-2025 financial yr.
However, the present tax framework presents challenges as losses from crypto transactions are usually not recognized, resulting in “friction quite than justice,” said Ashish Singhal, co-founder of CoinSwitch.
