Crypto in India

India's cryptocurrency regulatory framework operates under a patchwork of financial regulations rather than comprehensive digital asset 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 banking bans violated constitutional rights. Currently, cryptocurrencies are legal but unregulated as specific assets, falling under general financial laws including the Prevention of Money Laundering Act 2002 (PMLA), which was amended on March 7, 2023 to include Virtual Digital Asset (VDA) service providers under its reporting requirements. The Reserve Bank of India maintains authority over banking relationships and launched the Digital Rupee (e₹) wholesale pilot on November 1, 2022, while the Ministry of Finance oversees taxation policy through the Central Board of Direct Taxes. No formal crypto bill has passed Parliament, though the government introduced the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 for discussion, which proposed banning private cryptocurrencies while creating a framework for the RBI's digital currency.

India implemented one of the world's most stringent cryptocurrency tax regimes effective April 1, 2022 under Finance Act 2022 provisions. All Virtual Digital Asset (VDA) transfers attract a 30% flat tax on gains without any deductions for expenses (except acquisition cost) and no loss offset provisions against other income. Additionally, Section 194S of the Income Tax Act mandates a 1% Tax Deducted at Source (TDS) on all crypto transactions exceeding ₹10,000 (approximately $120) per transaction or ₹50,000 (approximately $600) annually per exchange, creating significant liquidity friction. The Central Board of Direct Taxes requires detailed reporting of all transactions, with exchanges mandated to provide user transaction data. Unlike equity investments which benefit from long-term capital gains tax rates after one year, crypto assets face the 30% rate regardless of holding period. The government collected approximately ₹257 crore ($31 million) in TDS during the first nine months of implementation according to Parliament disclosures.

India hosts over 100 million cryptocurrency users according to October 2023 estimates from the National Association of Software and Service Companies (NASSCOM), representing approximately 7.1% of the population despite the punitive tax regime. Daily trading volumes across Indian exchanges averaged $135 million in Q4 2023, with WazirX, CoinDCX, and ZebPay maintaining dominant market positions. Institutional activity remains limited but growing, with 15 crypto startups receiving funding exceeding $250 million in 2023 according to Tracxn data. The National Payments Corporation of India enabled UPI integration for crypto exchanges in December 2023, facilitating easier rupee deposits. Non-fungible token (NFT) markets saw $4.2 billion in secondary sales volume in 2023, while decentralized finance (DeFi) protocols attracted $1.8 billion in total value locked by Indian users according to Chainalysis metrics. Remittances using stablecoins reached $3.5 billion in 2023, representing 2.1% of India's total remittance inflows.