Rajwant Sandhu, the top civil servant in Himachal Pradesh state, said the money found during a raid on the Karmapa's monastery had been donated by his followers, the Press Trust of India news agency reported.
The Karmapa had no links to the money since the affairs of his trust are managed by his followers, Sandhu said.
"The Karmapa is a revered religious leader of the Buddhists and the government has no intentions to interfere in religious affairs of the Buddhists," PTI quoted her as saying.
Sandhu could not immediately be reached for comment.
The Karmapa, 24, left Tibet in 2000. Since then, he has been living at the monastery in Sidhbari, just outside Dharmsala, which has been the headquarters of the self-declared Tibetan government-in-exile since the top spiritual leader, the Dalai Lama, fled the Himalayan region in 1959.
Last week, state police probing the case said the Karmapa's followers violated Indian tax and foreign currency laws in collecting the donations.
Police and revenue officials searched the Gyuto Tantric Monastery and twice questioned Ugyen Thinley Dorje, the 17th Karmapa, and his aides about the source of the money.
The raid was unprecedented and particularly surprising since the Karmapa is revered by Tibetans and Buddhists across India. India has gone to great lengths to provide asylum to Buddhist leaders who have fled Tibet, including the Dalai Lama.
The Karmapa Office of Administration adamantly denied Indian media reports that the Buddhist leader might be a Chinese agent sent to India to control exiled Tibetan Buddhists who have made their home there.
China's government reviles the Dalai Lama, accusing him of pushing for independence for Tibet and sowing trouble there. A boy named by the Dalai Lama as the second-highest Tibetan spiritual leader, the Panchen Lama, in 1995 disappeared shortly afterward and China selected another boy.