India’s Crypto Tax

In the Crypto Assets ecosystem, there are new developments every day, and one of the recent advancements is regarding cryptocurrency taxation in India. To regulate Crypto Assets in India, the government recently announced a 30% tax on cryptocurrency transactions in the 2022 Finance Bill. However, by 2025, India’s cryptocurrency tax system has undergone significant changes. The tax rate on cryptocurrency gains has been adjusted from 30% to 25%, and for transactions exceeding 10,000 rupees, the withholding tax (TDS) has been reduced from 1% to 0.5%.

A tiered tax structure based on holding periods has been introduced, with rates ranging from 15% to 25%, and additional benefits for long-term holdings. The digital rupee (CBDC) pilot project has been expanded nationwide, with over 50 million users. These reforms reflect India’s increasingly mature attitude towards the regulation of Crypto Assets, creating a more favorable environment for innovation in digital assets across the ecosystem while imposing taxes.

Latest developments in 2025

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By 2025, India’s Crypto Assets tax regime has significantly evolved since its introduction in 2022. The current regulatory landscape includes:

• The Crypto Assets capital gains tax rate adjusted from 30% to 25% - Withholding tax (TDS) on transactions over 10,000 rupees reduced from 1% to 0.5% - Introduction of tax brackets for different holding periods
  The revised framework distinguishes between short-term and long-term Crypto Assets holdings:

holding period	tax rate	Additional Benefits
< 12 months	25%	none
12-24 months	20%	Basic deduction
> 24 months	15%	Enhanced Deduction

The Digital Rupee (CBDC) pilot project has been expanded nationwide, with over 50 million users. In addition, regulatory clarity has improved through comprehensive classification guidelines for various digital assets.
These reforms reflect India’s increasingly mature stance on Crypto Assets regulation, creating a more favorable environment for digital asset innovation across the ecosystem while also imposing taxation.

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The development of the Crypto Assets ecosystem is changing rapidly, and a recent hot industry news is about the cryptocurrency tax in India. To regulate the cryptocurrency in India, the government recently announced a 30% tax on cryptocurrency transactions, which will be part of the 2022 Finance Bill.

This article introduces the Indian government’s stance on Crypto Assets. Last year, there was a heated discussion in India about banning private Crypto Assets and the introduction of a digital currency (digital rupee) by the Reserve Bank of India. Around March 2021, the Narendra Modi government proposed a complete ban on conducting Crypto Assets activities in India. However, the majority of the public opposed the Crypto Assets ban. Nevertheless, within less than a year, the government has relaxed its regulatory stance on Crypto Assets rather than imposing a total ban.

If you are a regular in the Crypto Assets field, this article will provide you with in-depth insights into the latest factual information regarding the local crypto ecosystem in India. India is the world’s second-most populous country, with crypto investments exceeding $10 billion and over 100 million crypto assets; the country is a relevant player in the global crypto space. In this article, we will discuss the impact of this tax on crypto trading in India and the framework that the tax will adopt.

India has over 100 million Crypto Assets users, with approximately 7.3% of the population holding Crypto Assets, which is an important aspect of the financial system’s development. Data shows that Crypto Assets are widely adopted in India; statistics indicate that from March 2020 to February 2021, trading volume increased by 500%. As of 2020, data shows that India’s daily Bitcoin trading volume was about $60 million.

The top 10 countries with the most Crypto Assets holders

Source of the image: C# Corner

Since 2018, there has been a legal dispute regarding the use of crypto assets in India, including the Reserve Bank of India’s ban on banks providing services related to crypto assets. However, in March 2020, the Supreme Court of India lifted this ban in a ruling on the case brought by the Internet and Mobile Association of India against the Reserve Bank of India. In 2021, the “Crypto Assets and Official Digital Currency Regulation Bill” proposed the creation of a digital currency and a complete ban on other crypto assets. However, in 2022, Indian Finance Minister Nirmala Sitharaman announced that a crypto assets tax rate would be implemented starting April 1, 2022, opening a new chapter for crypto assets development in India.

The Finance Minister said in a quote, “Therefore, for the taxation of virtual digital assets, I propose to stipulate that any income from the transfer of virtual digital assets should be taxed at a rate of 30%.” This statement was made on February 1 and sparked in-depth discussions among many crypto assets experts in India. While some praised the government’s openness towards the taxation of crypto assets, others expressed concerns that this tax could be a hindrance for new investors coming from India. Another aspect of the new tax system is a 1% tax deduction at source when conducting transactions and transfers.

Under this new tax system, there are still some areas that need clarification, such as what the scope of “virtual digital assets” is and how encryption gains will be calculated, among others. Considering that such high tax rates are almost on par with the gambling industry tax rates, the government seems to be trying to deter investors from using Crypto Assets. However, experts hope that over time, the tax rates will decrease to encourage more investors.

What are virtual digital assets

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In the new financial bill, a statement explaining the taxation of crypto assets is quoted as follows: “Virtual digital assets have gained widespread popularity in recent years, and the trading volume of such digital assets has also increased significantly. Furthermore, a new market star is rising, where a virtual digital asset transfer payment can be made through another such asset. Therefore, the draft regulation proposes to implement a new plan to tax these types of virtual digital assets.”

The problem still exists; what are virtual digital assets?

Considering the rapidly changing development of blockchain technology, it is expected that laws must cover any new changes in the Crypto Assets ecosystem to avoid potential legal issues in the future. As anticipated, the term “virtual digital assets” has been given a broad definition to accommodate any future changes. According to the proposed legislation, virtual digital assets include any information, code, digital or tokens generated through encryption or other means (not including Indian currency or any foreign currency). The scope of this definition also encompasses NFTs.

How are Crypto Assets gains taxed in India?

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According to Article 55 of the Income Tax Act of 1961, Crypto Assets and NFTs should not be taxed as they do not fall under the jurisdiction of this law. However, starting from April 1, 2022, any income from digital assets will be taxed at a rate of 30%. This provision comes from the regulations of the Finance Act of 2022.

What is the framework behind the taxation of Crypto Assets income?

Crypto Assets can generate profits under different circumstances. Moreover, there is also a debate about whether Crypto Assets are assets or currency. The provisions of the “Financial Act” indicate that Crypto Assets are regarded as a type of asset; therefore, when a person receives payment in it, it will be taxed as an asset.

In addition to a 30% tax on Crypto Assets income, a 1% tax is also levied on the source assets. This tax will be deducted from the recipient and paid as tax. It is reported that the 1% TDS is a way for the government to track Crypto Assets transactions in the country.

Regardless of the type of identity used for Crypto Assets, individuals must declare their transaction income, which will be taxed similarly to capital gains tax. If Bitcoin or any other Crypto Assets are used to pay for goods and services, the recipient will pay taxes on the portion of the amount received that is considered income.

Another situation is that if Crypto Assets are used as investment tools, taxes will be paid based on the profits generated from the investment. If you are a Crypto Assets trader, every profit made from buying and selling Crypto Assets will be taxed. NFTs are not excluded either, as every profit made from selling NFTs will be taxed.

A fundamental question is whether individuals and business entities need to pay these taxes with the help of tax experts. Alternatively, the government could collaborate with cryptocurrency trading platforms in India to automate tax reporting.

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