India Crypto Tax Risk Rises as Income Tax Department Backs RBI

India Crypto Tax Risk Highlighted in Parliament Finance Panel

It looks like the "wait and watch" period for crypto in India is officially over. The India crypto tax risk has reached a new peak as the government officially moves from watching the market to strictly policing it.  On January 7, 2026, the Income Tax (I-T) Department made it clear that they aren't fans of how virtual assets are moving. In a big meeting with the Parliament’s Finance Committee, tax officials stood side-by-side with the Reserve Bank of India (RBI) to warn everyone: they see bitcoin as a high-risk gamble that makes it too easy to hide money.

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The big problem for the tax department is that crypto is "borderless". Unlike a bank transfer where there’s a clear paper trail, crypto can move across the world in seconds through private wallets or overseas apps. This makes it a nightmare for the government to track who owns what and who owes taxes. By speaking up now, the I-T department has officially joined the RBI in a unified front, treating crypto more like a threat to the country’s wallet than a helpful new technology.

A Unified Front: I-T Department and RBI Coordinate on Crypto Risk

The government is no longer just "concerned" they are taking action. Over the last few weeks of 2025 and into early 2026, thousands of Indian crypto users woke up to official emails known as Section 133(6) notices. These aren't just "hello" notes; they are serious demands for information.

The tax office is now using data from the 49 exchanges registered with the Financial Intelligence Unit (FIU). This means if you’ve traded on a major Indian app, they likely already know your numbers. They are cross-checking the 1% TDS (the tax cut from every trade) with your yearly income reports. If things don’t add up, you’re going to have to explain why.

The Strategy of Containment

Right now, India’s plan seems to be "regulatory containment". Think of it like putting digital asset in a very small, very expensive box. By keeping a flat 30% tax on any profits and refusing to let people subtract their losses, the government is making it very hard for the average person to make money.

Officials told Parliament that because bitcoin is decentralized, it’s "virtually impossible" to recover unpaid taxes without help from other countries. So, instead of trying to chase every single coin, they are making the rules so strict that only the most dedicated (or daring) traders will stay in the game.

Safeguards vs. Friction

To keep things transparent, every company dealing in digital asset must now register with the government. While this sounds like a good safety measure, many experts say it’s actually creating "friction". For example, if you make a profit on Bitcoin but lose an equal amount on Ethereum, you still have to pay 30% on the Bitcoin win. You can’t use the loss to balance it out. It’s a "heads they win, tails you lose" situation for the taxpayer.

Conclusion

As we get deeper into 2026, the message from New Delhi couldn't be clearer: the "free-for-all” days of Indian crypto are done. For the millions of Indians who were excited about the digital economy, the reality is a bit of a cold shower. With the tax office and the RBI now working as a team, the focus is entirely on control and compliance. For now, the Indian market is a place where you can still play, but you’ll have to pay a very high price to do so.