Crypto still unregulated, but under tax and enforcement radar: FinMin in Parliament

The Finance Minister has said that crypto assets remain unregulated in India, but this does not place investors beyond the reach of taxation or enforcement authorities. In a written response to Parliament, the ministry clarified that while it does not maintain data on individual crypto holdings, instances of tax evasion and illegal use of crypto assets are actively monitored and acted upon by multiple agencies.

Replying to a Lok Sabha query, Minister of State for Finance Pankaj Chaudhary stated that virtual digital assets (VDAs), including cryptocurrencies and NFTs, are currently not regulated. However, he emphasised that the sector has been brought under the regulatory ambit of the Financial Intelligence Unit–India (FIU-IND) for the purposes of anti-money laundering (AML) and combating the financing of terrorism (CFT).

Reporting crypto earnings

To curb misuse, crypto service providers are now required to register with FIU-IND and comply with stringent obligations such as customer due diligence, maintenance of transaction records, and reporting of suspicious activities. FIU-IND analyses these inputs and shares actionable intelligence with law enforcement agencies. The Enforcement Directorate (ED) has already investigated several crypto-linked cases under the Prevention of Money Laundering Act (PMLA), attaching or seizing proceeds of crime worth ₹4,209.74 crore, arresting 29 individuals, and filing 24 prosecution complaints. One accused has also been declared a fugitive economic offender.

CBDT’s NUDGE campaign

On the taxation side, the government made it clear that crypto transactions must be disclosed. The Income Tax Department takes action wherever tax evasion related to VDAs is detected, including nudging taxpayers, conducting e-verification, reassessment, surveys, and search and seizure operations. The CBDT’s NUDGE campaign has already flagged taxpayers who undertook crypto transactions but failed to report them in Schedule VDA of their income tax returns, using data analytics tools such as Project Insight.

The government also clarified that benami and overseas crypto holdings are not exempt. The Benami Property Transactions Act applies to benami-held VDAs, while the Black Money Act covers undisclosed foreign crypto assets. Separately, the Reserve Bank of India continues to caution users about the economic, legal, and security risks of dealing in VDAs and has advised banks to maintain strict KYC, AML, and CFT controls.Crypto taxation in India

Crypto taxation in India

In India, profits arising from the sale, exchange, or use of crypto assets are taxed at a flat 30%, along with applicable surcharge and a 4% health and education cess. This makes it critical for investors and traders to fully understand the tax implications before transacting in digital assets.

The taxation framework for crypto was formally introduced in the Union Budget 2022, when Finance Minister Nirmala Sitharaman brought cryptocurrencies and related assets under the legal definition of “Virtual Digital Assets” (VDAs). This category includes popular cryptocurrencies such as Bitcoin and Ethereum, as well as digital collectibles like non-fungible tokens (NFTs).

Crypto taxation in India is governed by Section 115BBH of the Income-tax Act. The law does not distinguish between short-term and long-term holdings—all gains are taxed at the same 30% rate, with no benefit of indexation or concessional tax treatment. Further, deductions are tightly restricted: only the cost of acquisition can be offset against gains. Expenses such as transaction fees, platform charges, or mining costs are not allowed.

To improve compliance and traceability, a 1% Tax Deducted at Source (TDS) applies to every transfer of VDAs since July 1, 2022. The Union Budget 2025 reinforced this provision with stricter reporting and disclosure norms. From FY 2025–26 onwards, crypto exchanges and designated intermediaries are required to mandatorily report transactions to tax authorities.

Adding to the tax burden, an 18% GST became applicable from July 7, 2025, on crypto trading and service fees across platforms. Levied separately on transaction bills, this GST—on top of income tax and TDS—has significantly increased costs for active traders and reduced net trading margins.