Crypto in India

India's crypto framework is legal but heavily taxed, with the Reserve Bank of India (RBI) and Ministry of Finance sharing oversight. The Supreme Court's March 2020 ruling in Internet & Mobile Association of India v. RBI struck down the RBI's 2018 banking ban, forcing banks to serve crypto exchanges. However, the RBI retains a restrictive stance, citing financial stability risks. The Ministry of Finance introduced a 30% tax on virtual digital assets (VDAs) effective April 1, 2022, under the Finance Act 2022, and a 1% tax deducted at source (TDS) on transactions above INR 10,000 from July 1, 2022. In March 2023, the government extended anti-money laundering (AML) provisions of the Prevention of Money Laundering Act (PMLA) to crypto exchanges, requiring them to report suspicious transactions. The RBI launched a wholesale CBDC pilot in November 2022 and a retail pilot in December 2022, but has not issued a full retail CBDC. Crypto is not recognized as legal tender; the government has not introduced a comprehensive regulatory law, leaving enforcement fragmented.

India imposes a 30% flat tax on gains from VDAs, with no deduction for expenses other than the cost of acquisition. Losses from crypto cannot be offset against other income or carried forward. A 1% TDS applies to all transfers of VDAs exceeding INR 10,000 per financial year, with 1% deducted by the buyer or exchange. Additionally, a 1% TDS on transfers and a 30% tax on gains have led to significant compliance burdens. The tax framework, effective from April 2022, has been criticized for driving traders to offshore platforms. The government also mandates that crypto exchanges report transactions to the tax authorities, and non-compliance can attract penalties under the Income Tax Act. The taxation regime has generated substantial revenue but has also stifled domestic trading volumes.

India has over 100 million crypto users, making it one of the largest markets globally. Despite the 30% tax and 1% TDS, retail adoption remains robust, driven by high mobile penetration and a young population. Peer-to-peer trading and offshore exchanges have gained traction to circumvent tax burdens. Institutional adoption is limited due to regulatory uncertainty, but some fintech companies have integrated crypto payment solutions. Use cases include remittances, where crypto offers cheaper cross-border transfers, and DeFi participation. The RBI's CBDC pilots have seen moderate participation, with the retail pilot reaching 1 million users by mid-2023. However, the lack of clear regulatory clarity has deterred large institutional players.