India's Cryptocurrency Legislation and Financial Budget Announcement!
As of mid-2025, India's cryptocurrency regulation is in a state of evolving legislation and discussion, with no fully enacted comprehensive crypto regulation bill yet.
- Crypto Regulation Bill Status
A draft bill named the COINS Act (Crypto-systems Oversight, Innovation and Strategy Act) was introduced recently as a model law proposing progressive crypto regulation. The bill proposes the creation of a specialized regulator called the Crypto Assets Regulatory Authority (CARA). The COINS Act offers a legislative blueprint but has not been formally passed by Indian Parliament yet.
The COINS Act proposes four fundamental rights in the crypto sector, including rights related to non-custodial solutions, privacy, and peer-to-peer interactions. The bill also differentiates crypto entities based on risk levels, imposing strict regulation on custodial services (centralized exchanges), lighter oversight on less decentralized services, and exemptions for fully decentralized protocols.
India is also preparing a multi-agency regulatory framework involving SEBI, RBI, and the Finance Ministry to oversee crypto tokens resembling securities since April 2025.
- Taxation Implications
The Indian government treats cryptocurrencies as Virtual Digital Assets (VDAs) and imposes a 30% tax on profits from trading and income from crypto. Starting February 1, 2025, unreported crypto gains are liable to be taxed as undisclosed income at a high rate of 60% under block assessment procedures, reflecting tighter tax compliance measures. There is also a 1% TDS (Tax Deducted at Source) on all crypto transactions, as well as penalties including jail time and heavy fines for non-compliance with tax laws.
However, the COINS Act draft proposes to prohibit punitive taxation on crypto transactions, suggesting possible future relaxation if the bill is passed.
- Investment and Compliance Considerations
The evolving regulations and tax regime mean investors face high tax burdens and strict compliance requirements, including mandatory reporting. Non-custodial users and decentralized protocols may have lighter regulatory burdens under proposed laws, potentially encouraging innovation and privacy-centric investment approaches.
The government's stance remains cautious, recognizing crypto's popularity but aiming for robust frameworks to mitigate risks and align with global standards ahead of international peer reviews like the Financial Stability Board assessment in October 2025.
In summary, India is moving towards a formal crypto regulatory framework with the COINS Act draft guiding significant changes, but no definitive law has yet been enacted. Meanwhile, the current taxation system imposes heavy taxes (30%) on crypto gains and a strict 60% tax on unreported income, alongside transaction-level TDS, which affects investment decisions by increasing the cost and compliance overheads for Indian crypto investors.
The cryptocurrency bill in India may not provide the government with more clarity on the taxation system for crypto income. Non-compliance with the rules and regulations set by the government for the use of crypto coins in India will result in complications and penalties. The cryptocurrency bill is expected to be a part of the 2022-23 budget session in India. The Prime Minister of India wants a synchronized global action towards cryptocurrency regulations to benefit from the underlying technology of crypto coins.
- Amid the evolving crypto regulatory landscape in India, the COINS Act proposes a focus on financial oversight, creating the Crypto Assets Regulatory Authority (CARA), but the bill remains drafted and awaits formal passage in the Parliament.
- The Indian government has implications for business and politics as it imposes a 30% tax on crypto profits and 60% on unreported gains, with stricter measures under block assessment procedures. However, the COINS Act draft shows a possibility of future tax relaxation if enacted.
