India’s tax administration has formally joined the country’s central bank in opposing the adoption of cryptocurrencies, signalling a coordinated push by key arms of the government to tighten the screws on digital assets in the world’s largest retail market.
Indian Tax Authorities Urging Crypto Clampdown, Aligning with Central Bank: Times of India
8 January 2026 - 14:24 CET
By Sandmark staff
In a presentation to the Parliamentary Standing Committee on Finance, the Income Tax Department warned that virtual digital assets (VDAs), such as cryptocurrencies, pose significant risks to tax enforcement, financial oversight and capital controls, according to a Times of India report.
The tax authorities argued that the core features of crypto - anonymity, borderless operation and near-instant settlement - allow funds to move outside the regulated financial system, bypassing traditional intermediaries such as banks.
Officials told lawmakers that offshore exchanges, decentralised platforms and private wallets make it extremely difficult to identify beneficial owners, detect taxable income or reconstruct transaction trails, according to the report.
Evolving government approach
Crucially, the presentation reflects an evolution in the government’s approach. Since 2022, India has imposed a punitive tax regime on crypto trading, including a flat tax on gains and transaction-level withholding, measures that forced exchanges and investors into the tax net.
According to officials, data collected through these mechanisms is now being used to map market behaviour and to inform policy advice to warn against wider crypto adoption, the Times report said.
The Income Tax Department also highlighted jurisdictional challenges, noting that many crypto transactions involve multiple countries, limiting the authorities’ ability to verify flows or recover tax dues.
Even where international information-sharing mechanisms exist, officials said the complexity of cross-border crypto activity has hindered effective assessment, according to the report.
Central bank caution
The tax stance aligns closely with longstanding concerns raised by the Reserve Bank of India, which has repeatedly cautioned against cryptocurrencies on the grounds that they lack underlying value and pose risks to financial stability.
India’s enforcement agencies have echoed those concerns, citing the potential use of VDAs for money laundering and terror financing.
While India has stopped short of an outright ban, the presentation underscores a hardening institutional consensus. With both the tax department and the central bank advising caution, backed by formal testimony to parliament, the message to policymakers is clear: crypto may already be taxable, but it is not welcome.
For the global crypto industry, the stakes are high. India is not only the world’s most populous country but also one of its largest potential retail markets.
A unified front between fiscal authorities and the central bank suggests that broader crypto adoption in India could face sustained resistance, not just regulatory friction.
