Crypto in India

India maintains a complex but increasingly defined legal framework for cryptocurrencies. The Reserve Bank of India (RBI) and Ministry of Finance share regulatory oversight. In March 2020, the Supreme Court of India (Writ Petition No. 528 of 2018) struck down the RBI's April 2018 circular banning banks from servicing crypto exchanges, ruling it unconstitutional. Since then, no comprehensive crypto-specific law has passed. The government instead relies on the Prevention of Money Laundering Act (PMLA) 2002, extended to virtual digital assets in March 2023, requiring exchanges to register with the Financial Intelligence Unit (FIU-IND). The Securities and Exchange Board of India (SEBI) has proposed classifying certain tokens as securities under the Securities Contracts (Regulation) Act 1956, but no final rules exist. Crypto trading is legal, but the RBI continues to warn against stablecoins and private digital currencies, favoring its CBDC pilot, the Digital Rupee (e₹), launched December 2022.

India's tax regime for crypto is among the strictest globally. The Finance Act 2022 introduced Section 115BBH of the Income Tax Act, imposing a flat 30% tax on income from transfer of virtual digital assets (VDAs), effective April 1, 2022. No deductions for expenses or losses are allowed. Additionally, Section 194S mandates a 1% Tax Deducted at Source (TDS) on all VDA transfers exceeding INR 50,000 (INR 10,000 for specified persons) per financial year, effective July 1, 2022. Losses from crypto trades cannot be offset against gains. Gifts of VDAs are taxable under Section 56(2)(x) if exceeding INR 50,000. The government has not clarified treatment of crypto-to-crypto trades, but the tax applies to each disposal event. Reporting thresholds are low: all transactions must be declared in annual tax returns. The 30% rate and 1% TDS have driven significant trading volume offshore to non-compliant exchanges.

India leads global crypto adoption by raw user numbers. Chainalysis's 2024 Global Crypto Adoption Index ranks India first for the second consecutive year, despite the punitive tax regime. Estimates from the Internet and Mobile Association of India (IAMAI) suggest over 100 million users, with monthly trading volumes on compliant exchanges like CoinDCX and WazirX averaging $1-2 billion in 2024. Institutional activity remains nascent but growing: Polygon (MATIC) and other Indian-founded protocols see significant developer activity. Retail use cases dominate: peer-to-peer transfers, remittances, and speculative trading. The Digital Rupee pilot has reached 5 million retail users and 400,000 merchant transactions as of Q3 2024, per RBI data. However, the 30% tax has pushed an estimated 40% of trading volume to decentralized exchanges (DEXs) and offshore platforms, per a 2024 Esya Centre report.