India’s government just told its own lawmakers what crypto skeptics have been saying for years: the virtual digital assets ecosystem is a minefield. In a note presented to the Parliamentary Standing Committee on Finance, senior officials formally categorized the entire VDA sector as “high risk,” citing intelligence reports that link it to everything from drug trafficking to cyber fraud.
The classification isn’t just regulatory posturing. It’s backed by a compliance gap so wide you could drive a truck through it. In FY23, only 1.39 lakh out of 6.45 lakh individuals subject to Tax Deducted at Source on crypto transactions actually reported their income. In English: roughly 78% of people who traded crypto and had taxes withheld simply didn’t bother telling the tax authorities about it.
What the committee heard
The parliamentary review, chaired by BJP MP Bhartruhari Mahtab, took place around May 20-21 and covered a lot of ground. The committee examined informal meetings held with major crypto exchanges operating in or adjacent to the Indian market, including Binance, WazirX, and ZebPay.
Those exchanges pushed for greater regulatory clarity and a more rational tax framework. The current regime, a flat 30% tax on VDA gains plus a 1% TDS introduced in 2022, has been a persistent source of frustration for the industry. Neither rate has budged since implementation.
