India Loves Crypto—But Its Government Just Made Holding It Brutal

Key Takeaways

• Indian crypto users hoping for regulatory relief in 2025 were met with new tax reporting rules and harsher penalties.
• The government doubled down on its strict stance, imposing fines of up to 70% on undeclared crypto holdings.
• The new tax framework has created a catch-22 situation.

India’s crypto industry has long struggled under a punitive tax regime, and the latest financial budget session only deepened citizens’ woes.

Despite repeated demands for a more balanced approach, the government refused to lower the country’s steep 30% tax on crypto gains. Instead, it introduced stricter reporting requirements and draconian penalties for non-compliance, further squeezing the industry.

The move is the latest in a series of measures that seem designed to curb crypto adoption rather than regulate it. Yet, paradoxically, India remains the world’s top country for crypto adoption.

A Catch-22 for India’s Crypto Market

The revised tax policy , set to take effect on Feb. 1, 2025, formally recognizes crypto as a “virtual digital asset”—but at a steep cost. The government has introduced a penalty of up to 70% on undeclared crypto gains, retroactively applying to holdings from the past 48 months.

This places Indian crypto holders in a no-win situation:

• If they report their crypto holdings, they face 30% taxation plus 1% TDS (tax deducted at source) on every transaction.
• If they attempt to avoid taxation by using decentralized exchanges or foreign platforms, they now risk crippling penalties if caught.

Starting April 2026, businesses dealing in crypto will also be required to report all transactions to tax authorities, with just 30 days to rectify any discrepancies. Exchanges and reporting entities must provide detailed information on:

• Individual users involved in transactions.
• The type and value of crypto assets used.
• Date, time, and transaction amounts (in fiat terms)

This increased scrutiny could drive more users underground, pushing them toward privacy-focused solutions or offshore platforms.

A False Promise of Crypto Reform?

Reports have periodically suggested that India is reconsidering its crypto stance, aligning with global trends toward friendlier regulations and even Bitcoin reserves. However, such optimistic predictions have surfaced every year since 2018—only to be met with further crackdowns.

The Reserve Bank of India (RBI), led by Governor Shaktikanta Das, has been a vocal critic of crypto. He warns that digital assets threaten financial stability and national sovereignty. His anti-crypto stance has largely shaped India’s rigid policies.

WazirX Hack: A Reality Check for Indian Crypto Holders

Many citizens assumed that the government’s strict taxation meant they would receive some level of protection in return.

That illusion shattered after the WazirX hack , where users lost millions. Despite widespread calls for action, authorities issued only a cautionary warning, reinforcing their hands-off approach.

At a time when major economies—including the U.S., European Union, and even Asian counterparts—are easing tax policies and considering Bitcoin as a reserve asset, India appears to be moving in the opposite direction.

With crippling taxes, restrictive regulations, and a lack of consumer protection, India’s crypto landscape remains uncertain—forcing crypto users to navigate an increasingly hostile environment.