India Tightens Crypto Tax Rules Amidst Global Adoption

India to Tighten Crypto Tax Rules, Faces Global Crypto Adoption

India is set to impose stricter tax rules on cryptocurrencies, with Finance Minister Nirmala Sitharaman announcing that crypto gains will fall under Section 158B of the Income Tax Act. This amendment, part of the Union Budget 2025, will subject crypto profits to retrospective block assessments starting February 2025. The move aims to curb tax evasion and increase transparency in the crypto sector.

Crypto traders in India may now face penalties of up to 70% on previously undisclosed profits, with the penalty applicable for up to four years following the relevant tax assessment year. The government is also introducing a 30% capital gains tax on all crypto profits and a 1% Tax Deducted at Source (TDS) on transactions.

Meanwhile, India is reassessing its regulatory stance on cryptocurrencies, with Economic Affairs Secretary Ajay Seth acknowledging the growing global adoption of digital assets. Seth noted that "more than one or two jurisdictions have changed their stance" on crypto, prompting India to review its long-delayed crypto discussion paper.

However, India's tax policies remain among the most restrictive in the world, with a 30% capital gains tax on all crypto profits and no distinction between short-term and long-term investments. Industry experts and legal professionals have criticized India's crypto tax regime as "draconian," arguing that it disincentivizes permissionless blockchain innovation.

Despite the changing global landscape, India continues to push for a Central Bank Digital Currency (CBDC) as an alternative to decentralized cryptocurrencies. Former Reserve Bank of India (RBI) governor Shaktikanta Das has been a vocal supporter of the CBDC initiative, viewing digital rupees as a more controlled and state-backed alternative to decentralized cryptocurrencies.

As India navigates these regulatory challenges, crypto investors and exchanges will need to adapt to the country's evolving tax landscape. The Indian government's tax enforcement signals a growing global crackdown on crypto tax evasion, following similar moves in the US, Europe, and South Korea.