India has formally classified its entire virtual digital assets ecosystem as a 'high risk' sector. The government briefed the Parliamentary Standing Committee on Finance, citing intelligence linking digital assets to money laundering, drug trafficking, cyber fraud, and terror financing. Officials noted 'thousands of crores' leaving the country through crypto channels.
A massive tax gap underscores the concern: of the roughly 645,000 people who had tax deducted at source on crypto transactions in FY23, only 139,000 reported any income. That means 78% of crypto traders did not tell tax authorities they made money.
Enforcement is accelerating. The Financial Intelligence Unit has registered 54 virtual digital asset providers and issued nearly $3.5 million in penalties to platforms like KuCoin and Binance for operating without registration. Authorities have blocked 63 URLs and taken down 85 sites.
Despite imposing a 30% gains tax three years ago, India still lacks comprehensive crypto legislation. The parliamentary committee is expected to issue recommendations, but no timeline has been set.