India’s tax authorities have reportedly identified major gaps in how crypto gains are being declared, underscoring a growing enforcement challenge that is emerging alongside the country’s long-running debate over crypto regulation. According to documents reviewed by Reuters, less than a quarter of people who reported making crypto transactions were actually declaring them on tax returns for the year ending in March 2023.
The same set of government documents reportedly estimates that India had roughly 39 million crypto traders holding assets worth more than $2.1 billion by the end of May. With offshore venues, private wallets, and peer-to-peer (P2P) activity increasingly common, the findings point to why tax authorities may struggle to track transactions and recover revenue—even if policy shifts are already being discussed at the central bank level.
Key takeaways
- Reuters reports India’s crypto tax reporting gaps: fewer than 25% of 645,000 individuals who transacted in the year ending March 2023 declared those trades.
- Government documents cited by Reuters estimate about 39 million crypto traders in India holding over $2.1 billion in crypto as of end-May.
- The tax issue adds a new dimension to India’s policy debate, shifting attention from only financial-stability concerns to offshore trading and tax compliance.
- India is not alone: a separate disclosure effort in Israel also underperformed against expectations, according to local reporting.
India’s reporting gap highlights a tracking problem
Reuters, citing government documents, says the tax department found that crypto activity is not being reflected consistently in tax filings. The Reuters report frames this as a practical enforcement issue: when trading happens on offshore exchanges, through private wallets, or via P2P arrangements, linking transactions to taxable income becomes harder.
The scale of the issue—reported involvement by 645,000 individuals in the year ending March 2023—makes it more than a niche compliance problem. If fewer than a quarter reported their activity, tax leakage could remain substantial, particularly as retail participation appears to be large. Reuters’ cited estimate of around 39 million crypto traders and more than $2.1 billion in holdings at end-May suggests that the affected population may continue to expand.
India’s standing in adoption metrics adds context. The Reuters report notes India was ranked first in Chainalysis’ 2025 Global Crypto Adoption Index, which implies widespread on-the-ground usage. When adoption rises faster than tax compliance, authorities often face a widening gap between real-world activity and reported taxable events.
Central bank containment guidance meets tax enforcement reality
The Reuters findings land during a period when India’s central bank has signaled strong constraints on crypto usage in the financial system. Earlier coverage referenced that the Reserve Bank of India (RBI) backed a “containment” approach, arguing for keeping banks and financial institutions insulated from cryptocurrencies and privately issued stablecoins.
On July 3, the RBI reportedly urged lawmakers to preserve that containment stance. Reuters’ summary indicates the central bank reiterated that prohibition remained an available policy option, while also recommending steps aimed at preventing digital asset use in payments and settlements. In other words, the RBI’s primary focus has been on limiting crypto’s reach into mainstream financial plumbing.
But the new tax documentation shifts emphasis. Even with banking and payment rails constrained, crypto trading can continue through offshore platforms and decentralized or private channels. That creates a different policy challenge: authorities may still need tools to identify taxable transactions and enforce reporting obligations, regardless of whether the regulated banking sector is deeply exposed.
Cointelegraph attempted to obtain a comment from India’s Central Board of Direct Taxes but reported it had not received a response by the time of publication.
Israel’s disclosure program also fell short
India’s compliance struggle echoes a broader pattern seen in other jurisdictions. In Israel, a voluntary disclosure program aimed at bringing previously undisclosed crypto profits into the tax net reportedly did not meet expectations, according to a June 3 report by Globes.
Globes reported that the Israel Tax Authority (ITA) expected the program to raise between 2 billion and 3 billion Israeli shekels (roughly $650 million to $986 million). The scheme offered criminal immunity to taxpayers who disclosed hidden capital. However, local reporting says only 289 disclosure requests were submitted after the program started in August 2025.
Globes further reported reported capital of 676.5 million shekels and an estimated tax due of 40.9 million shekels—far below the initial expectations and also below what was characterized as the size of the crypto tax gap.
Tax experts cited by Globes pointed to a key design issue: the lack of an anonymous disclosure track. If taxpayers believe they will be identifiable, the incentive to come forward may weaken, especially when enforcement risk and reputational concerns are perceived as high.
What investors and builders should watch next
For market participants, the practical question behind the headlines is whether governments can close the compliance gap without simply chasing an ever-shifting set of on/off-ramps. India’s reported figures suggest that enforcement is becoming a major pillar of policy—one that depends on data visibility across offshore trading, P2P activity, and private custody.
Investors and crypto users should watch for the next steps from tax authorities and regulators: whether India moves toward tighter reporting requirements, improved information-sharing, or more targeted compliance measures aimed specifically at harder-to-trace trading routes. Until then, the tension between widespread adoption and incomplete tax reporting is likely to remain a defining risk for the sector.
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