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New Delhi: The virtual digital assets (VDA) ecosystem has been classified as "high risk", with intelligence reports flagging widespread illicit activity, ranging from drug and human trafficking to radicalisation through social media, high-value crypto transactions in sensitive locations and money laundering, top government officials told a parliamentary panel.
Officials, including revenue secretary, corporate affairs secretary and representatives from the CBDT, briefed the Parliamentary Standing Committee on Finance, headed by BJP MP Bhartruhari Mahtab, on Wednesday highlighting rising risks, enforcement actions and gaps in tax compliance.
While 6.45 lakh individuals were subjected to TDS on crypto transactions in FY23, only 1.39 lakh disclosed such income in their tax returns, indicating significant non-filing and misreporting.
Also Read: How US President Donald Trump's crypto venture and Iran's top exchange tapped into the same industry networks
Financial surveillance has also intensified. Financial Intelligence Unit-India (FIU-IND) increased dissemination of operational and tactical analysis (OA/TA) reports from 16 in FY24 to 18 in FY25 and 22 in FY26, signalling a stronger intelligence-led enforcement push. These reports have identified key illicit typologies, including money laundering through peer-to-peer (P2P) channels and exchanges, fake crypto platforms and Ponzi/MLM schemes. Authorities have also flagged links to serious crimes such as narcotics trafficking, human trafficking, smuggling and the circulation of child sexual abuse material, along with emerging risks like terror financing, cyber fraud and VPN-based transactions.
FIU-IND has initiated 52 compliance proceedings under PMLA, largely against offshore entities operating without registration. It has issued four compliance orders, imposed penalties in three cases involving global exchanges and issued one warning. Following action, four offshore VDA service providers - KuCoin, Binance, Coinbase and Bybit - paid a cumulative monetary penalty amounting to ₹29 crore.
There are 54 VDA service providers registered with FIU-IND.
Authorities have also blocked 63 URLs and taken down or disabled access to 85 websites and platforms for non-compliance under provisions of the Information Technology Act and related rules.
Amid tighter scrutiny, tax collections from VDAs have risen. In the assessment year 2023-24, ₹269 crore was collected as tax and ₹220.82 crore as TDS. These figures increased to ₹437 crore and ₹364.62 crore, respectively, in assessment year 2024-25.
To strengthen oversight, reporting entities must now disclose crypto transactions under Rules 242 and 243 of the Income-Tax Rules, 2026, effective January 1. Officials have also proposed linking crypto ownership with PAN and introducing uniform valuation norms.
After the meeting, Mahtab termed the scale of investments "alarming", noting that "thousands of crores" are flowing into such assets, often moving offshore, underscoring the need for tighter regulation and taxation.
Officials, including revenue secretary, corporate affairs secretary and representatives from the CBDT, briefed the Parliamentary Standing Committee on Finance, headed by BJP MP Bhartruhari Mahtab, on Wednesday highlighting rising risks, enforcement actions and gaps in tax compliance.
While 6.45 lakh individuals were subjected to TDS on crypto transactions in FY23, only 1.39 lakh disclosed such income in their tax returns, indicating significant non-filing and misreporting.
Also Read: How US President Donald Trump's crypto venture and Iran's top exchange tapped into the same industry networks
Financial surveillance has also intensified. Financial Intelligence Unit-India (FIU-IND) increased dissemination of operational and tactical analysis (OA/TA) reports from 16 in FY24 to 18 in FY25 and 22 in FY26, signalling a stronger intelligence-led enforcement push. These reports have identified key illicit typologies, including money laundering through peer-to-peer (P2P) channels and exchanges, fake crypto platforms and Ponzi/MLM schemes. Authorities have also flagged links to serious crimes such as narcotics trafficking, human trafficking, smuggling and the circulation of child sexual abuse material, along with emerging risks like terror financing, cyber fraud and VPN-based transactions.
FIU-IND has initiated 52 compliance proceedings under PMLA, largely against offshore entities operating without registration. It has issued four compliance orders, imposed penalties in three cases involving global exchanges and issued one warning. Following action, four offshore VDA service providers - KuCoin, Binance, Coinbase and Bybit - paid a cumulative monetary penalty amounting to ₹29 crore.
There are 54 VDA service providers registered with FIU-IND.
Authorities have also blocked 63 URLs and taken down or disabled access to 85 websites and platforms for non-compliance under provisions of the Information Technology Act and related rules.
Amid tighter scrutiny, tax collections from VDAs have risen. In the assessment year 2023-24, ₹269 crore was collected as tax and ₹220.82 crore as TDS. These figures increased to ₹437 crore and ₹364.62 crore, respectively, in assessment year 2024-25.
To strengthen oversight, reporting entities must now disclose crypto transactions under Rules 242 and 243 of the Income-Tax Rules, 2026, effective January 1. Officials have also proposed linking crypto ownership with PAN and introducing uniform valuation norms.
After the meeting, Mahtab termed the scale of investments "alarming", noting that "thousands of crores" are flowing into such assets, often moving offshore, underscoring the need for tighter regulation and taxation.
