Tracking Crypto Is Tough: After RBI, Income Tax Department Raises Concerns

New Delhi: Cryptocurrencies and other virtual digital assets (VDAs) continue to spark debate globally. India remains one of the countries that has yet to formally approve cryptocurrencies. The Reserve Bank of India (RBI) has already voiced strong opposition, and now the Income Tax Department has highlighted major risks associated with these digital assets.

Concerns Raised by Income Tax Authorities

During a presentation to the Parliamentary Finance Committee, tax officials emphasized that cryptocurrencies enable instant money transfers across borders without banks or government intermediaries. Identities can remain hidden, making the system difficult to monitor.

The department pointed out that foreign exchanges, private digital wallets, and decentralized platforms make it nearly impossible to determine taxable income. Ownership often remains opaque, and transactions lack transparency. Officials also flagged legal challenges in tracing foreign crypto transactions, noting that multiple countries may be involved, which complicates investigations and tax recovery.

Monitoring Challenges

Despite recent efforts to enhance international information sharing, tracking the chain of transactions and accurately calculating taxable amounts remains extremely difficult. India continues to resist legalizing cryptocurrencies, even under significant global lobbying pressure. Investigative agencies are also concerned about potential misuse for money laundering and terror financing.

As virtual digital assets gain global attention, Indian authorities remain cautious, warning investors and the public about the risks of unregulated crypto trading.