India’s tax authority finds three-quarters of crypto traders under-report gains

India’s tax department has identified a significant shortfall in crypto-related tax reporting, with government documents showing that fewer than a quarter of individuals who transacted in digital assets during the year to March 2023 declared those trades on their returns, according to a Reuters report cited by Cointelegraph on Wednesday.

The documents indicate that of 645,000 people identified as having made crypto transactions in that period, only a small minority reported the activity to the Central Board of Direct Taxes. The tax authority separately estimated that India had around 39 million crypto traders holding combined assets worth more than $2.1 billion as of the end of May.

Officials reportedly attribute the reporting gap to the difficulty of tracking activity conducted through offshore exchanges, private wallets and peer-to-peer trades, channels that fall outside the reach of domestic reporting obligations. Cointelegraph said it had sought comment from the Central Board of Direct Taxes but had not received a response by the time of publication.

Enforcement gap sharpens India’s policy dilemma

The findings introduce a fiscal dimension to a policy debate in India that has so far centred largely on financial stability. The disclosure comes days after the Reserve Bank of India, on 3 July, urged lawmakers to keep banks and other financial institutions insulated from cryptocurrencies and privately issued stablecoins. The central bank reportedly told lawmakers that outright prohibition remained a recognised policy option and recommended blocking the use of digital assets in payments and settlements.

India was ranked first in Chainalysis’s 2025 Global Crypto Adoption Index, underscoring the scale of retail participation that authorities are now attempting to bring within the tax net. The combination of high adoption, an underdeveloped reporting culture and the RBI’s containment stance points to a widening gap between the size of the domestic crypto market and the state’s capacity to monitor or tax it.

A global pattern of unmet tax expectations

India is not alone in struggling to convert crypto trading volumes into recoverable tax revenue. In Israel, a voluntary disclosure programme designed to draw hidden crypto profits into the open has fallen well short of official projections, according to a 3 June report by the business outlet Globes.

The Israel Tax Authority had expected the scheme, which offers criminal immunity to taxpayers who disclose previously hidden capital, to raise between 2 billion and 3 billion Israeli shekels, roughly $650 million to $986 million. Since its launch in August 2025, however, only 289 disclosure requests have been submitted, covering reported capital of 676.5 million shekels and an estimated tax liability of just 40.9 million shekels.

Globes cited tax experts who said the absence of an anonymous disclosure track had weakened the incentive for crypto holders to come forward, a structural weakness that echoes the enforcement challenges now facing Indian authorities as they attempt to close their own reporting gap.

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