India is rapidly advancing in the field of digital financial technology, with Finance Minister Nirmala Sitharaman highlighting the country’s progress during a recent address at the Indian Council for Research on International Economic Relations (ICRIER) event ahead of India’s G20 presidency. As part of this momentum, the Reserve Bank of India (RBI) has launched a wholesale digital rupee pilot involving nine major banks, aiming to enhance efficiency in interbank markets. A retail central bank digital currency (CBDC) pilot is also expected to roll out soon within a closed user group.
With India assuming the G20 presidency from Indonesia, it will host over 200 meetings across the year, positioning itself as a key player in shaping global economic discourse. Among the top priorities on India’s agenda: cryptocurrency regulation, digital assets, and financial innovation.
👉 Discover how global financial policies are shaping crypto’s future – explore expert insights here.
Cryptocurrency as a G20 Priority Under India’s Leadership
Under Finance Minister Nirmala Sitharaman’s leadership, cryptocurrency regulation has been identified as one of eight key focus areas during India’s G20 tenure. Recognizing the borderless nature of crypto transactions, Sitharaman emphasized that no single nation can regulate digital assets in isolation.
“We need all G20 members to come together and determine the best way forward,” she stated at ICRIER’s 14th Annual International Conference on G20.
She further stressed the importance of collaboration between international bodies such as the International Monetary Fund (IMF), Financial Stability Board (FSB), Organisation for Economic Co-operation and Development (OECD), and Bank for International Settlements (BIS). These organizations have already begun laying the groundwork for global crypto oversight.
The OECD recently introduced the Crypto-Asset Reporting Framework (CARF), designed to enable automatic cross-border exchange of crypto-related tax information among nations. Simultaneously, the FSB released its proposed International Regulatory Framework for Crypto-Asset Activities, marking the first coordinated attempt at a global standard.
Sitharaman’s meeting with OECD Secretary-General Mathias Cormann signaled India’s active role in advancing regulatory alignment. She underscored that effective regulation serves India’s national interest—particularly due to concerns over illicit uses of crypto, including potential funding for terrorism, drug trafficking, or financial system manipulation.
V. Anantha Nageswaran, India’s Chief Economic Advisor, echoed this sentiment, stating that one of India’s core G20 objectives will be to develop consensus-driven solutions for cross-border challenges like virtual asset regulation.
Taxation of Cryptocurrency in India: Current Rules and Updates
Despite growing policy discussions, cryptocurrency remains unregulated in India from a legal standpoint. While the RBI imposed a banking ban on crypto firms in 2018, it was overturned by the Supreme Court in 2020. Since then, no comprehensive legislation has been passed, though tax authorities have moved aggressively on enforcement.
In 2022, the Indian government introduced stringent tax measures under the Finance Act:
- A flat 30% tax on gains from virtual digital assets (VDAs), including cryptocurrencies and NFTs.
- No deductions or set-offs allowed against other income.
- A 1% Tax Deducted at Source (TDS) on all VDA transfers.
These rules apply regardless of holding period or profit size, making India one of the most heavily taxed jurisdictions for crypto investors.
In January 2025, the Central Board of Direct Taxes (CBDT) proposed new amendments to income tax return (ITR) forms to improve transparency and compliance. The revised ITR now requires detailed disclosures about:
- Ownership of virtual digital assets
- Income from foreign equity and debt instruments
- Investments in unincorporated entities—potentially including decentralized autonomous organizations (DAOs)
This move aligns with broader government efforts to increase accountability in digital finance and reduce tax evasion.
Public Consultation and Expanded Compliance Requirements
The CBDT opened a public consultation on these proposed changes, inviting feedback from stakeholders by January 15, 2025. One notable aspect of the draft is its inquiry into whether foreign-based crypto exchanges serving Indian users may qualify for a Significant Economic Presence (SEP) in India.
Introduced in 2016, SEP allows India to levy an equalization levy—a form of digital services tax—on non-resident e-commerce companies earning revenue from Indian users. If applied to crypto platforms, exchanges without a physical presence could still be taxed based on user volume, transaction value, or data collected.
Tax expert Rajat Mittal, who advises crypto firms before the Supreme Court, noted that many international exchanges could fall under this net:
“If an exchange serves thousands of Indian traders, it may trigger SEP criteria—leading to tax obligations even without formal registration.”
Additionally, the draft asks taxpayers to report:
- Net profits from business or profession involving VDAs
- Details of VDA transfers
- Current tax rate applicability (30%)
There is also growing scrutiny around DAOs. While not explicitly defined in law, investments in decentralized entities may now require disclosure—raising questions about their classification under existing tax frameworks.
Challenges and Industry Response
While the government aims to formalize crypto taxation, industry players argue that current policies are overly restrictive:
- The 30% tax rate discourages long-term investment.
- The 1% TDS applies even to losses or intra-wallet transfers, creating cash flow issues.
- Lack of clarity on NFT classification, DAO status, and forked coins leads to compliance uncertainty.
Many investors feel penalized despite contributing to innovation and financial inclusion. Yet, India’s proactive stance positions it as a leader in shaping responsible digital finance policy—balancing innovation with risk mitigation.
👉 Stay ahead of regulatory changes affecting your digital assets—learn more today.
Frequently Asked Questions (FAQ)
Q: Is cryptocurrency legal in India?
A: Yes. While not regulated by law yet, crypto trading is permitted after the Supreme Court lifted the RBI ban in 2020.
Q: What is the tax rate on cryptocurrency gains in India?
A: A flat 30% tax applies to all profits from virtual digital assets, with no deductions allowed.
Q: Do I have to pay tax when I buy or hold crypto?
A: No tax is due on purchase or holding. Tax is triggered only upon transfer or sale resulting in gain.
Q: What is TDS on crypto transactions?
A: A 1% Tax Deducted at Source applies to every VDA transfer, effective from July 1, 2022.
Q: Are NFTs taxed the same as cryptocurrencies?
A: Yes. NFTs are classified as virtual digital assets and subject to the same 30% tax and 1% TDS rules.
Q: Could foreign crypto exchanges be taxed in India?
A: Potentially yes—if they meet the Significant Economic Presence threshold based on user activity or revenue.
The Road Ahead
India’s dual approach—advancing CBDCs while tightening crypto taxation—reflects a strategic vision for digital finance. As a G20 leader, India is pushing for global cooperation on regulation while building domestic frameworks focused on transparency and compliance.
With ongoing consultations and evolving interpretations, stakeholders must stay informed. Whether you're an investor, trader, or builder in Web3, understanding India’s regulatory trajectory is essential.
👉 Get prepared for the next phase of digital finance evolution—start exploring now.
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