India’s approach towards virtual digital assets (VDAs) remains a unique paradox — strict taxation without a clear regulatory framework. While the government has imposed a flat 30% tax on all crypto gains and a 1% TDS on every transfer, it still does not legally define, regulate, or even formally recognize cryptocurrencies. This gap has created confusion for investors, exchanges, and policymakers alike, raising important questions about transparency, consumer protection, and the future of India’s digital economy.
A critical reference point in this debate is the Supreme Court’s landmark judgment in Internet and Mobile Association of India v. Reserve Bank of India (2020 10 SCC 274). In this case, the Court struck down the RBI’s banking ban on cryptocurrency trading, observing that state intervention must be proportionate, evidence-based, and supported by clear justification. The ruling acknowledged the risks associated with cryptocurrency but also emphasized that innovation cannot be curbed through excessive restrictions or uncertain policies.
Today, the situation reflects an even sharper contradiction. The government taxes crypto gains as legitimate income but does not provide investors with a defined legal status, regulatory protections, or clear compliance guidelines. This creates a “taxed but unregulated” vacuum, where investors bear financial burdens but lack legal safeguards — for example, dispute resolution mechanisms, consumer protection standards, or security guidelines for exchanges.
The absence of a structured framework also hampers innovation in blockchain, fintech, and digital asset technologies. With India positioning itself as a global digital powerhouse, a coherent policy is essential to support responsible innovation while protecting consumers from fraud, volatility, and market manipulation.
Moving forward, India must focus on classifying virtual digital assets, distinguishing between cryptocurrencies, utility tokens, NFTs, and stablecoins. Regulation must address taxation inconsistencies, operational clarity for exchanges, AML/KYC rules, and investor rights. A balanced, forward-looking regime will encourage innovation while maintaining financial stability.
As India’s digital economy accelerates, clarity is not just desirable — it is necessary for trust, growth, and global competitiveness.
