Most Indian crypto traders did not report trades to tax office

India’s tax department found fewer than 25% of the 645,000 people who traded cryptocurrency in the year ending March 2023 reported those transactions on their tax returns. Officials estimate about 39 million crypto traders in India held roughly $2.1 billion in digital assets at the end of May.

Government documents reviewed by tax officials attribute the reporting gap to trading on offshore exchanges, holdings in private wallets and peer-to-peer trades, which leave limited records for authorities to trace.

Those factors make it difficult for revenue agencies to identify taxable events and reconcile them with individual tax returns, the documents show.

On July 3 the central bank urged lawmakers to keep banks and other financial institutions insulated from cryptocurrencies and privately issued stablecoins. The central bank recommended preventing use of digital assets in payments and settlements and said prohibition remained a recognized policy option.

High retail interest in crypto has increased the scale of activity. India topped a global crypto adoption index in 2025, reflecting wide use and investment across different groups.

The structure of the market — offshore platforms, private wallets and peer-to-peer trades — limits the information available to tax authorities and complicates collection of taxable income.

In another country a voluntary disclosure program for hidden crypto profits fell well short of authorities’ expectations. The programme received 289 disclosure requests, reporting 676.5 million shekels of capital and an estimated 40.9 million shekels in tax. Local tax experts noted the absence of an anonymous disclosure option reduced incentives for holders to come forward.

The tax authority has not publicly commented on the document findings. Officials and policymakers are weighing options such as tighter reporting rules, expanded information-sharing with foreign platforms and mandatory reporting by intermediaries to increase compliance.

Until clearer reporting mechanisms or regulatory changes are in place, authorities will face limits on how much previously unreported crypto activity they can reliably identify and tax. Large numbers of traders, substantial holdings and trading routes that leave few official records present persistent enforcement challenges.