RBI Sticks to Crypto Ban Stance as Tax Department Flags Evasion

Internal government documents show the Reserve Bank of India still favors tighter restrictions on private cryptocurrencies. The country's Income Tax Department has separately flagged tax evasion risks from digital asset trading, according to the documents reviewed by local media.

India already imposes a 30% tax on crypto income and a 1% tax deducted at source on each transaction. The tax department's concerns center on underreporting of gains. Compliance has been patchy since the rules took effect.

The RBI has argued for years that cryptocurrencies threaten financial stability and monetary sovereignty. A 2018 circular that forced banks to stop servicing crypto exchanges was struck down by the Supreme Court in 2020. Since then the central bank has used indirect pressure, including cautionary statements and restricted access to the payment system.

The new signals could accelerate moves by exchanges to friendlier jurisdictions. Platforms like CoinDCX and WazirX have shifted operations or compliance teams to Dubai and Singapore. Domestic trading volume dropped sharply after the tax rules took effect. The 1% TDS alone compressed volumes an estimated 80% within months.

India has not banned crypto ownership. The Supreme Court ruling blocked the RBI's banking ban, and no new law has replaced it. The ambiguity itself creates friction. High taxes, past bank-account freezes, and renewed government signals push retail traders toward peer-to-peer transactions or foreign platforms. Those channels are harder for the tax department to track, creating a circular problem: the government wants more control, which drives activity offshore, which makes evasion harder to police.

The readthrough for global crypto markets is muted. India accounts for a small share of global trading volume – about 2-3% before the tax clampdown, less now. Regulatory hostility from a major emerging economy does not move Bitcoin's price the way a U.S. SEC action can. It adds to the narrative of fragmentation, where countries cannot agree on a framework, creating compliance costs for exchanges and dampening institutional entry that requires regulatory clarity.

The internal documents do not signal an immediate crackdown. They show the RBI and tax department are aligned in their skepticism. A crypto bill has been in draft since 2021, shelved multiple times. Whether it gets floor time in the next parliamentary session is uncertain. Until a law passes, the status quo holds: crypto is legal but taxed heavily, banks are cautious, and the government watches.