The cryptocurrency sector in India has come under scrutiny after the Parliamentary Standing Committee on Finance declared the country’s VDA a “high risk.”
The discussion brought together government officials, tax officials, law enforcement agencies, and representatives from major companies, including Binance, WazirX, and ZebPay.
Officials are said to have warned lawmakers that crypto-related activities in India are not just speculation or informal trading. Intelligence has linked some aspects of the environment to money laundering, cyber fraud, terrorist financing, drug trafficking, human trafficking, Ponzi schemes, and cross-border money laundering.
The committee, headed by BJP MP Bhartruhari Mahtab, was briefed by officials from the Revenue Department, Corporate Affairs Ministry, and the Central Board of Direct Taxes (CBDT).
Major Legal Differences Raise Warnings
One of the main issues discussed at the conference was the big difference between crypto trading activities and tax disclosure.
According to officials, around 6.45 lakh people were exempted from TDS in crypto transactions during FY23. However, only about 1.39 lakh users have disclosed crypto-related income while filing their tax returns. This inconsistency has now become a red flag for regulators and tax authorities.
Although India already imposes a 30% tax on crypto profits along with a 1% TDS law starting in 2022, business operations remain tight.
Lawmakers say that “thousands of crores” continue to flow into digital assets, with a large portion migrating outside of India’s regulatory framework.
Forced Actions Are Increasing
India has also increased its recruitment in the last year. The Financial Intelligence Unit of India (FIU-IND) said it has launched 52 anti-money laundering procedures, mainly targeting offshore crypto companies operating without proper registration.
Authorities have imposed penalties of ₹29 crore on platforms including Coinbase, Binance, KuCoin, and Bybit. Authorities also blocked 63 URLs and blocked access to 85 crypto-related websites and unrelated platforms.
Meanwhile, crypto tax collections have continued to rise dramatically. The tax revenue related to VDA has reportedly increased from ₹269 crore in AY 2023-24 to ₹437 crore in AY 2024-25, while TDS collections have increased to ₹364.62 crore.
Government Studying Global Crypto Models
Indian lawmakers are now studying crypto laws adopted by countries including the US, EU, Japan, Brazil, and China before deciding on the next phase of the legislation. Officials are also considering stricter reporting rules, PAN-linked crypto ownership tracking, and similar standards for monitoring the growth of services.
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