AAP MP Raghav Chadha on Tuesday said India taxes Virtual Digital Assets - which include cryptocurrencies, stablecoins, and tokenised assets - like they are legal but regulates them like they are illegal, urging the government to bring in rules to protect them.
"Legalise Virtual Digital Assets in India. Don't drive them offshore. Ring fence this ecosystem, strengthen the Anti-Money Laundering Law," Raghav Chadha said, participating in the debate on the Union Budget in the Rajya Sabha.
"India taxes cryptocurrency at 30% Capital Gain Tax + 1% TDS; yet offers no legal recognition, no investor protection, no dedicated AML (anti-money laundering) framework," the AAP MP said.
The Finance Act, 2022, introduced Section 194S in the Income-tax Act, 1961, mandating a 1 per cent Tax Deducted at Source (TDS) on the transfer of Virtual Digital Assets.
As much as Rs 705 crore in taxes was paid for income from Virtual Digital Assets (VDA) transactions during FY'23 and FY'24, parliament was informed on Tuesday.
"Virtual Digital Assets, has not been given the status of an asset class, because of which there is no dedicated licensing law, there is no clear consumer or investor protection law, there is no AML law, i.e. Anti Money Laundering Guidelines or Directions for this asset class, and there is, of course, no explicit legal classification. As a result, what has happened is that 4.8 lakh crore trade in this virtual digital assets has moved offshore," he said.
The MP pointed out that these digital assets are being traded in other countries like Dubai, Singapore, Malaysia and, as a result, 73% of India's crypto trading volume in the financial year 2025 has moved to offshore exchanges.
"What has further happened is that 180 virtual digital assets startups have moved to countries like Dubai and Singapore. And as a result, 12 crore people in India who want to invest in virtual digital assets, crypto, RWA (Real World Assets), who want to invest in stable coins, they are investing offshore. It is necessary that we implement compliance in India, regulate it heavily, but bring it onshore. Because of this, if this happens, then 15 to 20 thousand crore rupees will be deposited in the government treasury, they will get that much tax," he argued.
"Let us not fear innovation, let us regulate it. Prohibition is not protection, regulation is protection," he said.
