Why India Cryptocurrency Market Will Have to Wait Longer for Cryptocurrency Discussion Paper

Why India Cryptocurrency Market Will Have to Wait Longer for Cryptocurrency Discussion Paper

India is rethinking its position on cryptocurrencies as shifting global attitudes push the country to adopt a more flexible approach.

Economic Affairs Minister Ajay Seth recently announced that the government is reevaluating its position on digital currencies following crypto-friendly policies introduced by various nations, including U.S. President Donald Trump’s surprising policy shift.

This reassessment could delay India’s much-anticipated cryptocurrency discussion paper, which was initially scheduled for release in September 2024.

The global cryptocurrency landscape has witnessed dramatic changes, with numerous countries softening their views toward digital currencies.

Seth emphasised that given the naturally borderless nature of crypto assets, India’s approach cannot be one-sided. Although he refrained from mentioning specific nations, it’s evident that India is keen on staying competitive in the evolving crypto ecosystem to ensure regulatory coherence and economic relevance.

Cryptocurrencies Included in Tax Amendments under Section 158B

In a related development, India’s Finance Minister Nirmala Sitharaman made a landmark announcement in the 2025 federal budget: cryptocurrencies will now be included under Section 158B of the Income Tax Act.

This change mandates the reporting of previously undisclosed crypto gains and aligns digital currencies with traditional assets such as currency, jewellery, and bullion for tax purposes.

READ ALSO:

Kenyan Firms to Start Accepting Crypto Payments to Diversify Away from a Volatile Shilling

Under this amendment, cryptocurrencies are formally classified as Virtual Digital Assets (VDA). This classification aims to bring clarity to tax regulations concerning digital assets, providing a structured framework for their treatment.

The decision underscores the government’s efforts to regulate the growing crypto market while ensuring that crypto gains are transparently reported and appropriately taxed.

This regulatory step marks a critical turning point for India’s financial ecosystem as it seeks to balance innovation in the digital economy with robust fiscal policies.

Investors and traders will now need to adapt to the evolving tax environment and ensure compliance to avoid potential penalties.

Up to 70% Tax Penalty on Undisclosed Crypto Gains

One of the most striking aspects of the new regulatory framework is the imposition of a tax penalty of up to 70% on undisclosed crypto profits.

This hefty penalty could be applied to gains that remain unreported for up to 48 months following the relevant tax assessment year. Authorities have made it clear that taxpayers must disclose additional income in their updated Income Tax Return (ITR), accounting for a total tax and interest liability of 70%.

The move sends a strong message to crypto investors and holders: transparency is no longer optional. By treating cryptocurrencies as taxable digital assets, the government aims to curb tax evasion and ensure that digital financial activities contribute to national revenue.

While this may sound alarming for crypto enthusiasts, the new tax framework also presents an opportunity. By disclosing gains now and staying compliant, investors can safeguard their assets and avoid potential legal complications.

As India navigates its evolving crypto policy landscape, it’s clear that regulatory clarity will create a more stable and secure environment for digital asset adoption.

READ ALSO:

How Will Physical Offices and Local CEOs for Crypto Firms Operating in Kenya Change the Crypto Landscape

What Lies Ahead for India’s Crypto Landscape?

India’s reassessment of its crypto stance, along with strict tax regulations, indicates the government’s cautious yet proactive approach. On one hand, the reevaluation of crypto policies signals openness to innovation and global trends. On the other hand, the new tax amendments highlight the importance of responsible financial practices.

Investors and industry stakeholders will be watching closely as India redefines its position in the global cryptocurrency space. Whether this leads to greater adoption, better regulation, or a more secure financial environment remains to be seen. However, one thing is certain—India is no longer sitting on the fence when it comes to digital currencies.

For crypto enthusiasts and businesses, the message is clear: stay informed, comply with regulations, and be prepared for the evolving dynamics of India’s cryptocurrency ecosystem.

Leave a Reply

Your email address will not be published. Required fields are marked *