India has revised its crypto regulations to be consistent with U.S. regulations and more effective in facilitating tax compliance for digital assets.
India is reviewing its crypto regulations in response to global policy changes and evolving attitudes toward digital assets. As numerous governments, including the United States, implement new cryptocurrency policies, the nation reevaluates its approach. Updates to India’s crypto regulations may result from the ongoing assessment, which could impact exchanges and investors.
In response to global policy changes, India is reviewing its cryptocurrency regulations
India is revising its cryptocurrency regulations in response to the evolving stances of numerous other countries regarding digital assets. Ajay Seth, the Indian Economic Affairs Secretary, has announced that the government is reevaluating the rules outlined in the discussion paper regarding India’s crypto regulations to accommodate global trends.
“More than one or two jurisdictions have changed their stance towards cryptocurrency in terms of usage and acceptance. In that stride, we are having a look at the discussion paper once again,” Seth told Reuters.
The evaluation was initiated in response to President Donald Trump’s recent actions in the United States, including his demand to form a cryptocurrency working group. India acknowledges that digital assets are transacted globally, necessitating India’s crypto regulation to align with global trends.
India’s Present Crypto Regulations and Enforcement Actions
India is among the countries that have implemented stringent regulations regarding the use of cryptocurrencies, including imposing high taxes. In December 2023, the Financial Intelligence Unit (FIU) notified nine offshore cryptocurrency trading platforms for allegedly failing to comply with India’s crypto regulations.
Upon its registration with the Financial Intelligence Unit (FIU) in June 2024, Binance was penalized with 188.2 million rupees ($2.25 million). Nevertheless, the adoption of cryptocurrencies in the country has not been impacted by enforcement actions, and as a result, the authorities are again reevaluating their stance.
In 2023, India’s market regulator proposed a multi-agency approach to regulating cryptocurrencies, which implies a change in its current policies. However, the Reserve Bank of India has continued to harbor reservations regarding the potential risks of private digital currencies. The forthcoming policy review will determine whether India will adopt a more structured approach to cryptocurrency regulation.
New Tax Policies Regarding Undisclosed Cryptocurrency Gains
Additionally, India has initiated the implementation of new tax regulations for cryptocurrency merchants. The gains from one’s cryptocurrency investment will be subject to taxation under Section 158B, typically reserved for money, jewelry, and bullion, due to the modifications to the Income Tax Act.
The government issued a statement clarifying that to comply with section 285BAA of the Act, a reporting entity must disclose information regarding crypto assets. The Indian government is legislating the decentralized market, and these rollouts will commence on February 1, 2025.
A penalty of up to 70% is one of the penalties that individuals who use cryptocurrencies to trade without declaring their gains are subject to. The penalty applies to undisclosed gains within the four years preceding the tax assessment year. This was the outcome of investigations that revealed that many cryptocurrency exchanges had failed to remit goods and services taxes (GST) totaling 824 crore rupees ($97 million).
Compliance Efforts and Global Cryptocurrency Tax Regulations
India’s cryptocurrency taxation policy is consistent with global initiatives to regulate digital assets.
In June 2024, the U.S. Internal Revenue Service (IRS) implemented new regulations that mandated centralized exchanges to report digital asset transactions.
In December 2024, the Blockchain Association initiated litigation against the IRS, contending that these regulations encompass data acquisition requirements for decentralized exchanges. In India, regulatory uncertainty has led to the suspension of services by exchanges such as Bybit, which has raised similar concerns.
