Crypto Or Virtual Assets Not Regulated In India: Minister Pankaj Chaudhary

The question of the legality or illegality of specific crypto platforms does not arise as of date as crypto or virtual assets are not regulated in India, Minister of State for Finance Pankaj Chaudhary told Parliament on Monday.

However, to ensure oversight from an anti-money laundering and countering the financing of terrorism (AML/CFT) perspective, the Financial Intelligence Unit (FIU-IND) registers Virtual Asset Service Providers (VASPs) under the Prevention of Money Laundering Act (PMLA), he said in a written reply in the Lok Sabha.

"At present, crypto / virtual assets are not regulated in India. Consequently, the question of the legality or illegality of specific crypto platforms does not arise as on date," he said.

The registration requirement applies equally to domestic and offshore platforms that cater to users based in India, he said.

FIU-IND therefore maintains a dynamic list of virtual asset service providers who are not registered with them, he said.

Separately, he 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 (VDAs).

This applies to all transactions, including those involving offshore entities, if the income is chargeable to tax in India, he said.

Further, the Reserve Bank of India (RBI) has issued advisories warning users, holders, and traders of virtual currencies or crypto assets about the potential risks, including economic, financial, operational, legal, and security concerns, he said.

These advisories have been sector-wide and have not commented on individual platforms, he said.

Replying to another question, Chaudhary said the tax on income from transfer of Virtual Digital Assets (VDA), under section 115BBH of the Income Tax Act, 1961, was introduced from 2022-23.

Amount of tax on income from VDA as per Income Tax Returns was Rs 269.09 crore in 2022-23 as compared to Rs 437.43 crore in 2023-24, he said.

The government is utilising data analytics tools to trace and detect tax evasion from VDA related transactions, he said.

The analysis includes the use of Non-Filer Monitoring System (NMS), Project Insight and internal databases of the Income Tax Department, to correlate available information on VDA transactions with the transactions disclosed in the return of income by the taxpayer, he added.

Several capacity-building initiatives are being undertaken by the government to equip officers for effective compliance monitoring and investigation of VDA-related transactions, he said.

Training programs, specialized workshops, Chintan Shivirs and hands-on workshops are regularly conducted by various training institutes under the Income Tax Department, he said.

At a local level, he said, field offices conduct training sessions and webinars on digital forensics, blockchain analysis, legal frameworks, and handling of digital evidence.

The officers and officials are also imparted short-term training on digital forensics, in partnership with National Forensic Science University (NFSU), Goa, which empowers them to identify and trace VDA-related transactions from data captured during intrusive actions, he added.

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