Income Tax Dept Eyes Stronger Tracking Of Cryptocurrency Transactions From FY27

The Income Tax Department is preparing to significantly tighten oversight of cryptocurrencies and other Virtual Digital Assets (VDAs) beginning FY27, as authorities move to strengthen monitoring and tax compliance in India’s rapidly expanding digital asset market.

According to sources familiar with the matter, the Central Board of Direct Taxes (CBDT) is working on a comprehensive tax reporting framework that could bring a wider range of crypto-related transactions and entities under closer scrutiny.

As part of the proposed plan, the department is expected to launch three specialised pilot projects aimed at improving surveillance, intelligence collection, and technology-driven tracking of cryptocurrency and VDA transactions.

Sources told NDTV Profit that officials are examining the possibility of expanding the existing Statement of Financial Transactions (SFT) reporting mechanism to include additional categories of crypto and digital asset transactions.

If implemented, the move could substantially widen the reporting network by bringing more intermediaries, exchanges, and entities dealing in virtual digital assets within the tax department’s monitoring ambit. Authorities believe the expanded framework would help strengthen compliance verification and improve the detection of suspicious or undisclosed crypto-related financial activity.

The proposed measures are understood to be part of the CBDT’s broader strategy under its Central Action Plan, which focuses on enhancing tax oversight in sectors witnessing rapid digital and financial innovation.

Officials are particularly looking at ways to improve data collection and transaction visibility in the crypto ecosystem, which has seen growing participation from retail investors, traders, and fintech platforms in recent years.

The development indicates that the compliance environment for cryptocurrency investors, traders, and businesses may become considerably stricter over the coming years as tax authorities continue refining the regulatory framework around digital assets.

India already imposes a 30% tax on gains from Virtual Digital Assets along with a 1% Tax Deducted at Source (TDS) on certain crypto transactions. However, tax officials are now believed to be exploring stronger reporting and intelligence tools to improve enforcement and plug potential gaps in compliance.

The proposed expansion of reporting requirements could also help authorities create a more detailed audit trail of crypto transactions, enabling faster identification of tax evasion risks and undisclosed holdings linked to digital assets.

While the framework is still under discussion, the move signals the government’s intent to increase transparency and regulatory oversight in the cryptocurrency sector as digital asset adoption continues to grow in India.