‘India Taxes Crypto as Legal — So Why Regulate It Like It’s Illegal?’ Lawmaker Demands Clarity

India’s approach to crypto has drawn criticism for treating it as both legitimate and suspect at the same time. This contradiction was highlighted in Parliament when Raghav Chadha raised concerns during the Union Budget debate. He argued that the government is collecting taxes from virtual digital assets (VDAs) while failing to provide legal clarity, investor protection, or a structured regulatory system. According to him, this uncertainty is pushing billions of dollars in trading activity and hundreds of startups out of the country.

Speaking in the Rajya Sabha, Chadha said India must choose a clear path. If cryptocurrencies are not going to be banned, they should be regulated properly to prevent the industry from shifting permanently overseas. His comments have reignited discussions in New Delhi about whether the country will finally adopt a defined crypto framework or continue with its cautious stance.

Chadha cited data to underline the economic impact of the current policy. He claimed that about 73% of India’s crypto trading volume has moved to foreign exchanges, leading to roughly ₹4.8 lakh crore ($55 billion) in offshore activity. He also noted that around 180 Indian crypto startups have relocated abroad in search of clearer regulations. According to his estimates, a proper domestic regulatory structure could generate ₹15,000–20,000 crore ($1.65–$2.20 billion) in annual revenue.

At present, crypto gains in India are taxed at 30%, along with a 1% Tax Deducted at Source. However, the sector still lacks formal legal recognition, dedicated investor safeguards, and a clear regulatory framework. Chadha proposed treating VDAs as a separate asset class under a structured system. He also recommended strong anti-money laundering measures, improved compliance standards, and a domestic regulatory sandbox to support innovation while controlling risks. His core argument was that regulation, not prohibition, offers real protection.

The debate reflects wider political divisions. In 2022, Supriya Sule called for a complete crypto ban, questioning the logic of taxing something considered risky. Commerce Minister Piyush Goyal has also expressed caution, saying the government does not encourage cryptocurrencies. Former Finance Secretary Subhash Chandra Garg has warned that digital assets could enable money laundering, tax evasion, and illegal capital flows.

At the same time, some officials have shown a more balanced approach. Union Minister Jayant Chaudhary disclosed personal crypto holdings, while Meenakshi Lekhi suggested restrictions should apply mainly to illegal uses. IT Minister Ashwini Vaishnaw has indicated that while crypto as a currency may not be supported, blockchain applications could still be explored. These differing opinions show the lack of political consensus on the issue.

India’s crypto policy has evolved through warnings, restrictions, court interventions, and gradual regulation. The Reserve Bank of India first raised concerns in 2013. In 2018, it barred banks from dealing with crypto businesses, a move later overturned by the Supreme Court in 2020. Although the ruling revived the industry, it did not bring full regulatory clarity.

In 2022, the government introduced a 30% tax on crypto profits and a 1% TDS, acknowledging the sector without formally recognizing it. By 2023, the Financial Intelligence Unit required VDA service providers to register under anti-money laundering rules. Additional measures followed, including GST on exchange services, court recognition of crypto as property in certain cases, and enforcement actions against non-compliant offshore platforms.

Despite these steps, India still lacks a comprehensive digital asset framework covering licensing, investor protection, and market oversight. Public sentiment appears to favor reform, with surveys showing strong support for regulation and dissatisfaction with the current tax structure.

Chadha’s call for structured legalization comes at a time when crypto adoption in India remains high despite regulatory uncertainty. Whether his remarks lead to concrete policy changes or remain part of ongoing political debate is unclear. What is evident, however, is that India has moved from outright prohibition toward partial oversight. The next phase will likely focus on balancing innovation, financial stability, consumer protection, and compliance. If policymakers align on a clear framework, the country could transition from uncertainty to a more structured and sustainable crypto environment.

Voice Of Osiz

At Osiz, we see India’s ongoing crypto policy debate as a crucial turning point for the future of digital asset innovation. The call by Raghav Chadha for clear and structured regulation reflects what the industry has long needed—certainty, compliance, and investor protection. While India has taken steps such as taxation and AML rules, the absence of a comprehensive framework continues to push startups and trading activity overseas. As an AI and blockchain development company, Osiz believes that balanced regulation can unlock massive economic value while maintaining financial stability. A well-defined crypto framework would encourage innovation, attract investment, and support the growth of domestic Web3 enterprises. With India already leading in global crypto adoption, the right policies could position the country as a major hub for blockchain technology. We remain committed to helping businesses navigate regulatory landscapes and build secure, compliant, and future-ready blockchain solutions.

Source: CCN