India regulates crypto through taxation and anti-money-laundering law while declining, year after year, to legislate a framework. The Finance Act 2022 created the defining features: a flat 30% tax on virtual digital asset gains with no deduction beyond cost of acquisition and no loss offset, plus a 1% tax deducted at source on transfers above modest thresholds, which drove a large share of Indian volume to offshore platforms. The government answered that migration in March 2023 by extending the Prevention of Money Laundering Act to virtual asset businesses: exchanges and custodians must register with FIU-IND, and the unit has blocked and fined non-compliant offshore platforms, including a penalty against Binance in 2024, forcing major venues to register before re-entering.
The Supreme Court's 2020 ruling striking down the RBI's banking ban remains the constitutional baseline: trading is legal. But the promised policy discussion paper has been repeatedly deferred, the RBI remains institutionally hostile while running the digital rupee pilot, and no licensing, custody, or market-conduct regime exists. India holds the G20 presidency legacy of the IMF-FSB synthesis roadmap it championed in 2023, without yet applying a domestic framework of its own.
The instruments
Virtual digital asset taxation
30% tax on VDA transfer income, no loss set-off or carry-forward, and 1% TDS on transfers. Gifts of VDAs are taxable to recipients. The regime applies regardless of where the exchange is located.
PMLA coverage of virtual asset businesses
Exchange, transfer, safekeeping, and related VDA activities are 'designated businesses' under the Prevention of Money Laundering Act: FIU-IND registration, KYC, record-keeping, and suspicious transaction reporting. FIU-IND has directed blocking of non-compliant offshore platforms and imposed monetary penalties.