Crypto in India

India's cryptocurrency regulatory framework operates under a patchwork of financial regulations without comprehensive legislation. The Supreme Court's March 4, 2020 ruling in Internet and Mobile Association of India v. Reserve Bank of India overturned the RBI's April 6, 2018 circular that prohibited banks from servicing crypto businesses, establishing that blanket bans violate constitutional rights. Currently, cryptocurrencies are legal but unregulated as currency, falling under the Prevention of Money Laundering Act (PMLA) 2002 since March 2023 when the Finance Ministry mandated VDA registration and KYC compliance. The Reserve Bank of India maintains authority over banking channels and launched the Digital Rupee pilot on December 1, 2022. Parliament has considered but not passed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021, leaving regulatory gaps. The Securities and Exchange Board of India (SEBI) has proposed regulating crypto as securities, while the Ministry of Finance leads policy formulation through the Financial Stability and Development Council.

India implemented one of the world's strictest crypto tax regimes through Finance Act 2022 amendments effective April 1, 2022. All virtual digital asset (VDA) transfers incur a 30% flat tax on profits with no loss carryforward provisions, plus a 1% tax deducted at source (TDS) on transaction value exceeding ₹10,000 per transaction (₹50,000 annually for specified persons). The Central Board of Direct Taxes requires detailed reporting in Schedule VDA of ITR-2 forms. Gift taxes apply at recipient's income slab rates for crypto gifts exceeding ₹50,000. No deductions are permitted except acquisition cost, creating a higher effective rate than traditional capital gains (15%/20%). The 1% TDS provision (Section 194S) has reduced exchange volumes 70-90% according to October 2023 Crebaco Global data, driving users to offshore platforms.

India ranks first globally with 100.3 million crypto owners according to Triple-A's 2024 data, representing 7.1% population penetration despite restrictive policies. The Chainalysis 2023 Global Crypto Adoption Index placed India first in grassroots adoption, with $268.9 billion transaction volume July 2022-June 2023. Institutional activity remains limited due to regulatory uncertainty, though 2023 saw Tata Digital acquire Bitbns and Reliance Industries testing CBDC integration. Retail dominates with 97% of users holding under ₹10,000 according to April 2024 KPMG-India report. Primary use cases include remittances (World Bank recorded $125 billion inflows 2023), inflation hedging against 4.85% CPI, and micro-investment through platforms like CoinDCX and WazirX. The Digital Rupee pilot reached 4 million users by December 2023 across 13 banks.