๐ฎ๐ณ India's Cryptocurrency Taxation & Regulatory Landscape
๐ Current Taxation Framework
Capital Gains Tax: Profits from trading Virtual Digital Assets (VDAs), such as cryptocurrencies, are subject to a 30% tax.
Tax Deducted at Source (TDS): A 1% TDS is levied on crypto transactions exceeding โน10,000 for individuals and โน50,000 for specified persons, as per Section 194S of the Income Tax Act.
No Loss Offset: Losses incurred from one VDA cannot be offset against gains from another or any other income sources.
๐งพ Enhanced Compliance Measures (Effective April 1, 2026)
Mandatory Reporting: The introduction of Section 285BAA mandates specified entities, including crypto exchanges, to furnish detailed transaction information to tax authorities.
Expanded Definition of VDAs: The term now encompasses any crypto asset that relies on cryptographic security and distributed ledger technology, broadening the scope of taxable digital assets.
Classification as Undisclosed Income: Unreported crypto gains are now considered "undisclosed income," attracting a 60% tax and a 50% penalty on the tax amount.
๐ Industry Response
Calls for Tax Reforms: The crypto industry has been advocating for a reduction in the TDS rate to 0.01% and the ability to offset losses, aiming to foster innovation and prevent capital flight to foreign exchanges.
Impact on Trading Volumes: Since the implementation of the 2022 tax regime, domestic crypto trading volumes have plummeted by over 80โ90%, with many traders shifting to offshore platforms.
๐ Regulatory Developments
Global Alignment: India is aligning with the Crypto-Asset Reporting Framework (CARF) developed by the OECD, facilitating the automatic exchange of tax-relevant information on crypto assets.
Increased Scrutiny: The government is tightening oversight on crypto transactions, requiring banks and other reporting entities to furnish detailed transaction information, enhancing transparency and compliance.
