CRYPTO ASSETS AND TAXATION IN INDIA: AN ANALYTICAL STUDY

AUTHOR – ANIMESH SRIVASTAVA* & AMBAR SRIVASTAVA**

* STUDENT AT LAW COLLEGE DEHRADUN, UTTARANCHAL UNIVERSITY, DEHRADUN

** PROFESSOR AT LAW COLLEGE DEHRADUN, UTTARANCHAL UNIVERSITY, DEHRADUN

BEST CITATION – ANIMESH SRIVASTAVA & AMBAR SRIVASTAVA, CRYPTO ASSETS AND TAXATION IN INDIA: AN ANALYTICAL STUDY, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (5) OF 2026, PG. 392-402, APIS – 3920 – 0001 & ISSN – 2583-2344.

ABSTRACT

The rapid global rise of crypto assets has challenged traditional financial regulatory frameworks and compelled nations to rethink taxation, compliance, and investor protection. India represents a unique case where the government has not granted legal recognition to cryptocurrencies, yet has imposed one of the world’s strictest tax regimes. Through the Finance Act, 2022, crypto assets were formally defined as Virtual Digital Assets (VDAs) under Section 2(47A) of the Income Tax Act, followed by the introduction of Section 115BBH and Section 194S, mandating a flat 30% tax on gains and a 1% Tax Deducted at Source (TDS) on transfers. This approach reflects the policy stance of “regulation through taxation,” positioning taxation not merely as a revenue tool but as an implicit form of control over crypto usage.

This analytical study examines the taxation mechanism applicable to crypto transactions in India including trading, mining, staking, NFTs, and gifting and evaluates its implications for investors, exchanges, and the broader digital economy. It compares India’s framework with global practices in jurisdictions such as the United States, the United Kingdom, and the European Union’s recent MiCA regulation. The study highlights key challenges including the absence of dedicated legislation, lack of asset classification, complexity in reporting compliance, and potential capital flight arising from restrictive tax treatment and non-allowability of loss set-offs.

Findings indicate that while taxation has brought structural clarity and monitoring capabilities, the absence of a unified regulatory statute results in legal uncertainty and discourages innovation. The article concludes that India requires a balanced framework that integrates taxation with licensing, investor protection, and regulatory certainty to ensure sustainable development of the crypto ecosystem while preventing illicit use. A hybrid model combining technological facilitation with rational taxation can enable India to position itself competitively in the global digital asset economy.