India's Crypto Market Faces 30% Tax, 1% TDS on Trades

India is gradually embracing cryptocurrency with a cautious yet curious approach, aiming to create a transparent and secure market while mitigating risks such as fraud and money laundering. By March 2025, understanding the evolving regulatory landscape will be crucial for investors, businesses, and everyday users navigating India’s dynamic crypto scene. Indians are among the most enthusiastic crypto adopters globally, and the shifting policies could either open new opportunities or impose strict limitations for local startups and international companies eyeing the market. The Reserve Bank of India (RBI), the Ministry of Finance, and the Securities and Exchange Board of India (SEBI) are the key regulatory bodies shaping this evolving landscape.

Historically, India’s relationship with cryptocurrency has been marked by skepticism. In 2018, the RBI imposed a ban on banks dealing with crypto, citing concerns over illicit activities and financial instability. However, this ban was overturned in 2020 by the Supreme Court, which deemed it too restrictive, thereby providing a lifeline to the crypto industry. Since then, trading has surged, but regulatory clarity has remained elusive.

In 2022, the government introduced a 30% tax on crypto gains and a 1% tax deducted at source (TDS) on trades, which dampened the initial enthusiasm. This move was driven by the rapid increase in crypto users, with estimates suggesting that India had 270 million crypto users by 2024, prompting the government to seek greater control over the market. The delay of a discussion paper from 2024 to 2025, coupled with global shifts in crypto policies, indicates that India is re-evaluating its stance and hinting at clearer regulations in the near future.

India’s regulatory framework for cryptocurrency is overseen by three main entities. The RBI ensures that crypto is not considered legal tender and requires exchanges to register as virtual asset service providers (VASPs). The Ministry of Finance sets the tax framework, which includes a flat 30% tax on profits and a 1% TDS on trades exceeding ₹50,000. The SEBI steps in when crypto tokens resemble traditional investments, such as stocks. Exchanges must comply with the Financial Intelligence Unit (FIU) under the 2023 Prevention of Money Laundering Act (PMLA), which mandates strict anti-money laundering (AML) and know-your-customer (KYC) checks. Taxes are stringent, with no deductions allowed except for purchasing costs, and losses cannot offset other income. The regulatory status of initial coin offerings (ICOs), security token offerings (STOs), and non-fungible tokens (NFTs) remains unclear, with SEBI potentially intervening if they are classified as securities.

In March 2025, the Finance Ministry hinted at potential adjustments to the regulatory framework, influenced by global developments. A proposed bill from 2021, aiming to ban private cryptocurrencies while promoting a digital rupee, remains in limbo. India is balancing local needs with international standards as the crypto market continues to grow. Crypto is not recognized as legal tender for payments, but individuals can own and trade it through platforms like WazirX and CoinDCX, which are legally operating with FIU approval. Crypto mining is also legal, provided miners adhere to standard business laws and do not violate any government regulations. The RBI is exploring a digital rupee, with pilot programs from 2022 currently under review for a potential 2026 launch. In 2024, Binance paid ₹188.2 million in fines for past violations after registering with the FIU, and Coinbase is making a comeback after the initial ban. India’s regulatory approach is firm but adaptable, aiming for growth without compromising stability, and closely monitoring global trends such as the US’s pro-crypto signals in 2025.

India’s government is not rushing to fully embrace cryptocurrency but is also not ignoring its potential. The RBI’s National Blockchain Strategy, initiated in 2021, supports technological trials such as supply chain tracking. A 2025 discussion paper suggests a future regulatory sandbox for crypto innovations. While businesses cannot accept crypto payments, trading and remittance platforms are thriving, with over 10% of Indians holding crypto in 2024, driven by the affordability of overseas transfers. The Finance Ministry’s February 2025 review, prompted by global shifts, indicates a willingness to embrace innovation if risks are managed. The India Blockchain Forum advocates for growth, and firms like Mudrex see potential in softer regulations. India’s balancing act between technological progress and regulatory control could position it as a crypto hub, provided regulators ease their grip slightly.

India’s crypto regulations face several challenges. The RBI, SEBI, and FIU share responsibilities, but gaps in regulation, such as the lack of clear NFT guidelines, leave users uncertain. Enforcement is difficult due to the borderless and decentralized nature of crypto, making it hard to track tax evaders or money launderers, even with PMLA in place. Regulators struggle to keep pace with the market’s rapid evolution. Public opinion is divided, with young traders attracted to crypto’s potential wealth but older individuals and banks wary due to past scams, such as the WazirX hack in 2024. High taxes and unclear laws deter some, while others see opportunities in the chaos. The government faces the challenge of fostering innovation without unleashing risks, all while maintaining public trust.

In 2025, India’s crypto landscape saw significant developments. The Finance Ministry’s February 2025 review, influenced by global pro-crypto movements, delayed a 2024 discussion paper for further consideration. March saw indications of multi-regulator discussions, with SEBI proposing a unified framework. Taxes may be relaxed, and a digital rupee could be launched by 2026. Future regulations may tighten AML measures but ease trading restrictions, potentially attracting firms like Coinbase back after the 2023 FIU crackdown. India’s role in the G20 in 2023 set a precedent for global coordination, and its moves could influence Asia’s crypto trajectory. With 270 million users, India is a significant player, and clearer regulations could enhance its global influence, blending caution with opportunity.

India is developing a regulatory framework for cryptocurrency that is both stringent and optimistic, aiming for clarity by 2025. This is a critical development for investors, businesses, and users navigating the volatile market. With increasing adoption, India could lead Asia’s digital transformation if it strikes the right balance. Staying informed about these shifts through reliable sources is essential in this rapidly evolving landscape.