India is undergoing a pivotal shift in its stance towards cryptocurrencies, with both the Parliament and the nation’s tax authority working to deliver comprehensive regulatory and taxation frameworks that balance innovation with investor protection.
Parliament’s Progressive Vision for Digital Assets
The release of the 254th Cybercrime Report by Parliament’s Home Affairs Committee showcases India’s commitment to constructive regulation over prohibition. After years of debate, the government now aims to foster a secure environment for genuine users and crypto businesses, while combating fraud and money laundering. Key recommendations include:
- Classifying cryptocurrencies as digital assets under FEMA
- RBI regulation of stablecoins prior to launch
- Strict AML/KYC processes and alignment with FATF standards
- Post-quantum security protocols to counter sophisticated cyber threats
- Transparent tax and legal frameworks for digital assets
This new direction lays the foundation for both innovation and risk mitigation, signaling a move from chaos to regulatory clarity. The shift is expected to bring confidence to millions of Indian investors and blockchain entrepreneurs, and align the country’s approach with global best practices.
Tax Authority’s Push for Clear Crypto Tax and Administration
The Central Board of Direct Taxes (CBDT) is scrutinizing the current tax regime for virtual digital assets (VDAs), raising industry-wide discussions about high tax rates, liquidity challenges, and regulatory ambiguity. Currently, India imposes:
- 30% tax on crypto profits
- 1% TDS on every sale above ₹10,000 per year
- 18% GST on exchange fees and services
Industry advocates argue the steep 1% TDS erodes market liquidity and forces firms overseas. The CBDT is consulting stakeholders on lowering rates, refining the definition of VDAs, and improving derivative trading and cross-border transaction rules. The authority is also determining which agency—SEBI, RBI, MeitY, or FIU-IND—should oversee crypto regulations, and evaluating readiness for international standards like the OECD’s Crypto-Asset Reporting Framework (CARF).
Expert Insights and Economic Impact
During the recent Lok Sabha study on VDAs, sector leaders agreed that reforms could yield substantial benefits:
- Creation of over 7 million jobs
- Attraction of $2 billion annually in foreign investment
- Empowering India as a global leader in the Web3 space
Clear rules and adaptive frameworks are seen as catalysts for growth, innovation, and financial inclusivity. The harmonized approach promises to safeguard users, minimize fraud, and foster sustainable development in India’s rapidly evolving crypto market.
