India Stalling on Full Crypto Legislation, Here’s Why

India is not likely to create new laws to regulate the crypto market soon, according to a recent Reuters report citing a government document. Instead, the country will probably stick to its current partial oversight. 

India Intends to Maintain Partial Oversight on Crypto Laws

Undoubtedly, India is taking a careful approach to cryptocurrency regulations, unlike many other countries that are establishing clear rules. The country is concerned about the market’s volatility and the lack of worldwide agreement on regulations.

It is also worth noting that India’s cryptocurrency rules are not clear and are divided among different agencies, including the Reserve Bank of India (RBI), the Enforcement Directorate (ED), and the Ministry of Finance. Although crypto is not banned, there is no specific law that outlines how it can be used, how it is taxed beyond regular income, or how to protect investors.

The government is hesitant because it worries that fully integrating cryptocurrencies into the traditional financial system could create risks, especially in a developing economy like India.

India Imposes 70% Tax Penalties on Crypto Defaulters

Furthermore, cryptocurrency investors and traders in India are expected to face significant tax penalties on profits they failed to disclose. 

The country’s tax law demands this from crypto gains that remained undisclosed for up to 48 months after the relevant tax assessment year. With the new development, cryptocurrencies are under Section 158B of the Income Tax Act.

With this amendment, crypto gains that are not reported will be subject to block assessments. This automatically places cryptocurrencies under the same tax treatment as traditional assets like money, jewelry, and bullion. 

The payable penalty for this category is “70% of the aggregate of tax and interest payable on the additional income disclosed in the updated income tax return.”

Meanwhile, the new crypto tax proposition became effective retrospectively from February 1, 2025.

India Needs To Set Clear Crypto Rules

India has had a mixed history with cryptocurrency. In 2013, the Reserve Bank of India issued a warning against its use. In 2018, a ban was imposed, which was later overturned by the Supreme Court. Even now, India lacks clear guidelines on how to use or manage digital assets.

Pradeep Bhandari, a spokesperson for India’s ruling party, pointed out that India taxes crypto, but there are no proper laws to guide the industry. This confuses and slows progress. He stated that India needs clear rules to maximize the benefits of Bitcoin and protect investors.

He also stated that the International Monetary Fund (IMF) has recently classified Bitcoin as a capital asset. This shows why India needs to move fast. 

Recall that during its G20 presidency in 2023, India had a chance to lead on crypto policy. The country leaders worked with the IMF but did not create a clear national plan. Many people believe this delay is hindering India’s full potential to benefit from cryptocurrency.