India Flags Gaps in Crypto Tax Reporting as Offshore Trading Complicates Tracking

India’s tax department has reportedly identified widespread gaps in crypto tax reporting, saying offshore exchanges, private wallets and peer-to-peer (P2P) trades are making digital asset activity harder to trace and tax. According to Cointelegraph, Reuters on Wednesday cited government documents indicating that fewer than a quarter of 645,000 individuals who conducted crypto transactions in the year ending in March 2023 reported those trades on their tax returns. The department also reportedly estimated that India had about 39 million crypto traders holding over $2.1 billion in crypto at the end of May. The findings add a tax-enforcement dimension to India’s ongoing digital asset policy debate, extending the discussion beyond the central bank’s financial-stability concerns to issues such as offshore trading and potentially recoverable tax revenue. India was ranked first in Chainalysis' 2025 Global Crypto Adoption Index. The report follows renewed scrutiny from the Reserve Bank of India (RBI), which has backed a containment approach for crypto assets. Days before the report, on July 3, the RBI urged lawmakers to keep banks and financial institutions insulated from cryptocurrencies and privately issued stablecoins. The central bank reportedly said prohibition remained a recognized policy option and recommended preventing digital asset use in payments and settlements. Cointelegraph said it sought comment from India’s Central Board of Direct Taxes but had not received a response by publication. The broader challenge of enforcing crypto tax compliance is not limited to India, with other jurisdictions also reporting difficulties in bringing digital asset activity into the tax net. In Israel, a voluntary disclosure program intended to capture previously unreported crypto profits has reportedly underperformed. A June 3 report by local business outlet Globes said the Israel Tax Authority (ITA) expected to collect 2 billion to 3 billion Israeli shekels (about $650 million to $986 million) through the process, which offered criminal immunity to taxpayers who disclosed previously hidden capital. However, only 289 disclosure requests had been submitted since the program launched in August 2025, with reported capital totaling 676.5 million shekels and estimated tax due of 40.9 million shekels. Globes cited tax experts who said the absence of an anonymous disclosure track reduced incentives for crypto holders to come forward, contributing to results that fell short of expectations and the estimated crypto tax gap.