India — License Map

India operates one of the world's most punitive digital asset tax regimes, combining a flat 30% tax on all crypto gains (Section 115BBH) with a 1% Tax Deducted at Source on every transaction (Section 194S), no loss offset between assets, and no loss carryforward. The framework was introduced in the Finance Act 2022 and has remained unchanged through Union Budget 2026-27 despite sustained industry lobbying. The result has been a 60-87% decline in domestic exchange trading volume and an estimated 72.7% of Indian crypto trading migrating to offshore platforms beyond regulatory reach.

On the regulatory side, all crypto exchanges must register with the Financial Intelligence Unit-India (FIU-IND) as "reporting entities" under the Prevention of Money Laundering Act (PMLA), which was extended to cover Virtual Digital Asset (VDA) activities on 7 March 2023. As of early 2026, 49 exchanges (45 India-based + 4 offshore) are FIU-IND registered, and FIU-IND issued non-compliance notices to 25 offshore VDA service providers in October 2025. The underlying tax statute was recodified: the Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income Tax Act 1961, carrying the 30% rate / 1% TDS / no-loss-offset rules forward unchanged and adding a reporting-entity penalty regime (Sections 509 / 446). India committed to OECD CARF adoption by April 2027, with CBDT rules finalised in September 2025, which will enable automatic international exchange of crypto transaction data targeting the offshore migration problem. The Central Board of Direct Taxes has issued over 44,000 tax notices to crypto traders and uncovered INR 888.82 crore (~USD 99.9 million) in undisclosed crypto income through enforcement actions.

Regulatory Architecture

India's digital asset framework is administered by multiple bodies, though comprehensive licensing legislation (beyond AML registration) has not been enacted:

Key legislation and instruments:

FIU-IND registration is mandatory for all platforms facilitating VDA transactions. In January 2024, FIU-IND blocked nine offshore exchanges (including Binance, KuCoin, and Huobi) for operating in India without registration; several subsequently obtained registration and resumed compliant operations. In October 2025, FIU-IND escalated, issuing non-compliance notices to 25 offshore VDA service providers under Section 13 PMLA, directing app/website/URL takedowns. As of early 2026, 49 exchanges are FIU-IND registered (45 India-based + 4 offshore, reported to include Binance, KuCoin, Coinbase and Bybit).

Tax Reporting Obligations

Section 115BBH: Flat 30% Tax

All income from the transfer of VDAs is taxed at a flat rate of 30%, irrespective of the taxpayer's income slab, holding period, or whether the income would otherwise qualify as capital gains or business income. The effective rate with the mandatory 4% Health and Education Cess is 31.2% at minimum, rising to 42.74% with surcharges for high-income individuals:

Deduction restrictions: The only permitted deduction is the cost of acquisition of the specific VDA being transferred. Transaction fees, gas fees, advisory fees, and infrastructure costs (hardware, electricity for mining) are all prohibited deductions.

No loss offset or carryforward: Losses from one VDA transfer cannot offset gains from another VDA transfer. VDA losses cannot be set off against any other income head or carried forward to future years. This is widely regarded as the harshest aspect of the regime.

Section 194S: 1% TDS

Indian exchanges automatically deduct and deposit TDS. TDS paid is adjustable against the final tax liability and is refundable if total tax due is lower.

Reporting Requirements

• ITR forms: ITR-2 (capital gains) or ITR-3 (business income); ITR-1 and ITR-4 cannot be used if VDA income exists
• Schedule VDA: Mandatory line-by-line transaction details including date of acquisition, date of transfer, cost of acquisition, transfer consideration, and calculated gain per transaction
• Form 26AS / Annual Information Statement (AIS): TDS under Section 194S appears in these documents; the Income Tax Department cross-references Schedule VDA data with TDS data to identify discrepancies
• Exchange reporting: Starting FY 2025-26, mandatory reporting by crypto exchanges registered with FIU-IND; Form 26QF expanded to include VDA transaction reporting. From 1 April 2026, under Section 509 of the Income-tax Act 2025, crypto exchanges and other prescribed "reporting entities" must furnish user-level crypto-asset transaction statements directly to the Income Tax Department. Section 446 penalises lapses: INR 200/day for failure to furnish, INR 50,000 for inaccurate/uncorrected information or due-diligence failure

Mining, Staking, and DeFi

• Mining income: Two-stage taxation -- fair market value at receipt taxable as "Income from Other Sources" at slab rates; subsequent disposal taxed at 30% under Section 115BBH on appreciation above FMV at mining. Mining infrastructure costs are not deductible under Section 115BBH
• Staking rewards: Same two-stage model as mining -- taxable at slab rates on receipt, 30% flat tax on disposal
• Airdrops: Taxable at FMV on receipt as "Income from Other Sources"; on disposal, 30% flat tax applies
• DeFi activities: No specific guidance; yield farming, liquidity provision, and governance token rewards likely taxable at receipt

GST Treatment

Crypto transactions themselves are not directly subject to GST. Exchange platform service fees are subject to 18% GST (from 7 July 2025). No specific GST classification exists for VDAs as goods or services.

OECD CARF Adoption

India committed to implementing the OECD CARF with a target date of 1 April 2027:

• CBDT rules finalised: 8 September 2025
• Reporting entity obligations: Reporting Crypto-Asset Service Providers (RCASPs) must implement due diligence by 1 January 2027, verifying user residencies via KYC documents, PAN, and address proof
• Enhanced checks: Required for accounts exceeding EUR 1 million
• Annual reporting: By 31 May each year, covering the previous year, including transaction aggregates, fair market values, and wallet addresses
• Real-time reporting: For high-value trades exceeding INR 10 lakh
• Non-compliance penalties: INR 10,000 to INR 1 lakh per instance, mirroring PMLA fines
• As of October 2025, 52 jurisdictions including India committed to first exchanges by 2027

Enforcement

The CBDT has intensified crypto tax enforcement through multiple channels:

• NUDGE campaign: 44,057 emails and messages to individuals investing/trading crypto without tax reporting
• Tax notices: Over 44,000 tax notices to individuals who traded but did not report
• Undisclosed income discovered: INR 888.82 crore (~USD 99.9 million) uncovered through searches and surveys
• Investigation tools: Non-Filer Monitoring System (NFMS), Project Insight, AIS/TIS cross-referencing
• Penalties: 50% to 200% of tax evaded; criminal prosecution possible for wilful evasion

Regulatory Direction

India's crypto regulatory trajectory is characterised by aggressive tax enforcement with no relief in sight. Union Budgets 2025-26 and 2026-27 both retained the 30% flat tax and 1% TDS without modification. Industry proposals to reduce TDS to 0.01%, permit loss offset, or reduce the tax rate to 10-15% have all been rejected.

The policy has had dramatic market consequences: domestic trading volumes declined 60-87% following the 1 July 2022 TDS implementation, with an estimated 72.7% of Indian crypto trading now occurring on international exchanges beyond India's regulatory reach (up from 45% in mid-2023). Over INR 32,000 crore in trade volume shifted from Indian to foreign exchanges between February and October 2022 alone, and approximately 5 million Indian users moved to offshore exchanges between July 2022 and July 2023.

CARF adoption by April 2027 is India's primary mechanism to address offshore migration, enabling automatic international data sharing on offshore wallets and exchange trades. However, CARF cannot capture transactions on decentralised platforms. The fundamental tension in India's approach -- a punitive domestic regime that drives activity offshore, paired with international reporting frameworks designed to recapture that offshore activity -- remains unresolved.

Payment / Transfer Service Licensing

Overview

India does not have a dedicated crypto payment or transfer service licence. All crypto exchanges must register with FIU-IND under the Prevention of Money Laundering Act (PMLA). No specific payment licence framework exists for crypto beyond this AML registration. The RBI remains opposed to crypto payments, and crypto is not legal tender.

Payment restrictions: Crypto is not permitted for merchant payments in any structured framework. The 30% flat tax (no loss offset) and 1% TDS on all transfers create severe friction for payment use cases. GST at 18% applies to exchange service fees (from July 2025).

See

India Crypto Payment Regulation for full details on FIU-IND registration, RBI opposition to crypto payments, 30% VDA tax regime, and offshore exchange enforcement.

Recent Developments (since 2026-03-20)

• 1 April 2026 -- Income-tax Act 2025 in force. The Income-tax Act, 2025 replaced the Income Tax Act 1961, carrying the VDA regime (30% rate, 1% TDS, no loss offset) forward unchanged and adding Section 509 (reporting-entity statements) and Section 446 penalties (INR 200/day non-furnishing; INR 50,000 inaccurate/uncorrected info). TaxGuru · CoinDesk (2 Feb 2026)
• April 2026 -- DEA crypto policy discussion paper reportedly shelved. India's long-promised crypto discussion paper was reportedly shelved again amid RBI opposition, the latest in a string of deferrals; no comprehensive crypto licensing bill enacted. CryptoTimes (1 April 2026)
• 20 May 2026 -- Parliamentary Standing Committee on Finance, 7th VDA hearing. The committee (chair Bhartruhari Mahtab) summoned ZebPay, Binance, WazirX, IFSCA and revenue/corporate-affairs officials; government officials classified the VDA ecosystem as a "high-risk" sector. Committee remains in study phase; no licensing framework announced. CryptoTimes · Inc42

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Related coverage

India — License Map in other research domains:

• CBDC Frameworks
• Crypto Mining Regulations
• DeFi Regulation & Liability Frameworks
• Digital Asset Taxation
• NFT & Digital Collectibles Regulations
• Payment Services & Crypto Payment Regulation
• Stablecoin Regulations & License Regimes

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Verification Notes

• CORRECTION (2026-06-04): Enabling-statute references updated from "Income Tax Act 1961 / Finance Act 2022" to reflect the Income-tax Act 2025 in force from 1 April 2026 (substantive VDA regime carried forward unchanged); added Section 509 / Section 446 reporting-entity statement duties and penalties (INR 200/day; INR 50,000). Reconciled against the refreshed
  Digital Asset Taxation -- India and
  Crypto Payment Regulation -- India source files. Sources: TaxGuru, CoinDesk (2 Feb 2026).
• CORRECTION (2026-06-04): FIU-IND enforcement and registration data updated. The prior version cited only the January 2024 blocking of 9 offshore exchanges and listed an imprecise "Key holders" set. Corrected to reflect 49 registered exchanges (45 India-based + 4 offshore reported to include Binance, KuCoin, Coinbase, Bybit) as of early 2026 and the October 2025 notices to 25 offshore VDA service providers under Section 13 PMLA, per the refreshed Crypto Payment Regulation source file. Sources: PIB press release PRID 2173758, Blockonomi.
• CORRECTION (2026-06-04): PMLA VDA extension date made precise -- "March 2023" -> 7 March 2023 (SO 1072(E)); added the 8 January 2026 FIU-IND AML/CFT Guidelines (Enhanced Due Diligence, CERT-In cyber-security audits, Principal Officer duties, Travel Rule). Source: FIU-IND Guidelines PDF (8 Jan 2026).
• NOT VERIFIED: FIU-IND registration capital requirement, application/annual fee, processing timeline and client-asset safeguarding -- no published regulator data (FIU-IND registration is an AML/CFT registration, not a prudential or payment licence). Reported FY 2024-25 penalty figures on non-compliant offshore entities are media/industry-reported and not confirmed against the FIU-IND annual report.
• PARTIAL / SECONDARY-SOURCED (2026-06-06): The Income-tax Act 2025 section numbers corresponding to legacy s.115BBH (30% VDA tax) and s.194S (1% TDS) have been identified from converging secondary sources but NOT confirmed against the primary statute (see gap-closure entry below). The 30% VDA tax maps to Section 194(1), Table S.No. 4; the 1% TDS maps to Section 393(1), Table Sl. No. 8(vi). Legacy section numbers are retained alongside the new numbers as operative references pending a fetched primary confirmation.

Targeted gap-closure pass (2026-06-06)

• Gap worked (license-map register): "New Income-tax Act 2025 section numbers corresponding to legacy 115BBH (30% tax) and 194S (1% TDS)." Verification standard version operated under: 2026-06-04.
• Status: GAP REMAINS OPEN (primary 403-blocked). The mapping is now identified with high confidence from multiple converging secondary sources, but no primary statute text could be fetched, so per the verification standard the gap is not closed.
  • 30% VDA tax (legacy s.115BBH) → Section 194(1), Income-tax Act 2025, Table S.No. 4 ("Any income from the transfer of any virtual digital asset — 30%", same no-deduction/no-loss-offset/no-carryforward conditions). Statutory text reproduced verbatim by AUBSP — Income-tax Act 2025 s.194 and the clause-comparison note TaxTMI (Clause 194 Table S.No. 4 vs s.115BBH).
  • 1% TDS on VDA transfer (legacy s.194S) → Section 393(1), Income-tax Act 2025, Table Sl. No. 8(vi) (consolidated umbrella TDS section, effective 1 April 2026). Per TDSMAN (May 2026) — "TDS on Virtual Digital Assets – Section 393(1) (194S)" and India Briefing — Section 393 guide. (One earlier TDSMAN note gave the serial as 8(iv); the dedicated VDA article and India Briefing both give 8(vi) — 8(vi) adopted.)
• Primary sources attempted and BLOCKED (HTTP 403): official bare-Act PDF https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf; official section page https://www.incometaxindia.gov.in/w/section-393-5; official "FAQs on Interplay and Transition" PDF. The archive.org snapshot route was also unavailable (fetch tool cannot reach web.archive.org). incometaxindia.gov.in is a known automated-fetch-blocker host. Because the primary could not be fetched, the new section numbers are recorded as secondary-sourced and the legacy numbers are retained alongside.

For Full Details

• Crypto Payment Regulation:
  India — Crypto Payment Regulation -- FIU-IND registration, RBI opposition, 30% VDA tax, offshore exchange enforcement
• Digital Asset Taxation:
  India -- Digital Asset Taxation