India’s Supreme Court flags 30% crypto tax and regulatory gaps

India’s Supreme Court has criticised the absence of a clear regulatory framework for cryptocurrencies, describing Bitcoin trading as “a refined way of Hawala business” during a recent hearing.

The remarks were made on May 5, 2025, amid a bail hearing for Shailesh Babulal Bhatt, who faces charges related to Bitcoin transactions, according to PTI reports.

“Trading in Bitcoin appears to be a sophisticated form of Hawala. In the absence of regulation, it raises serious concerns,” Justices Surya Kant and N Kotiswar Singh expressed, highlighting the risks posed by unregulated crypto trading.

The court highlighted the government’s delay in establishing comprehensive crypto laws, which has contributed to ongoing legal uncertainty.

Senior advocate Mukul Rohatgi, representing Bhatt, argued that cryptocurrency trading is not illegal under current Indian laws, citing the Supreme Court’s 2020 decision that invalidated a Reserve Bank of India circular restricting banking services for crypto businesses.

Rohatgi maintained that his client’s transactions did not violate any statutes.

The bench directed the Gujarat government and the Enforcement Directorate to submit responses within 10 days and scheduled the next hearing for May 19.

This case revisits a 2022 Supreme Court directive requesting the government clarify the legal status of cryptocurrencies.

Despite consultations and proposals since then, no formal legislation has been enacted.

India currently imposes a 30 percent tax on profits from trading virtual digital assets (VDAs) and a 1 percent tax deducted at source on transactions exceeding specified thresholds.

However, losses or expenses cannot be deducted from taxable income.

During its 2023 G20 presidency, India advocated for coordinated international crypto regulation, working with the IMF and Financial Stability Board to develop a regulatory roadmap adopted by member countries.

Industry stakeholders continue to call for clear policies to balance innovation with financial oversight amid ongoing regulatory challenges.