India Compliance Report

Generated 2026-10-23

Partially Regulated

Regulatory Overview

Regulatory Status: Some rules exist but significant gaps; draft legislation or limited guidance
Key Regulator(s): Ministry of Finance
Risk Level: high
Primary Legislation: Finance Act 2022 inserted s 115BBH (30% tax on income from transferring a virtua, India has no comprehensive crypto law and no ban: VDA service providers register
Travel Rule: Not adopted
Tax Reporting: Under the Income-tax Act 1961 as amended by the Finance Act 2022, income from transferring a virtual digital asset is taxed at a flat 30% (section 115BBH, from assessment year 2023-24) with no deduction other than cost of acquisition and no set-off or carry-forward of VDA losses; 1% TDS applies from 1 July 2022 (section 194S), except where a specified person pays no more than ₹50,000, or any other payer no more than ₹10,000, in a financial year. The Income-tax Act 2025 replaces the 1961 Act from 1 April 2026; the 1961 Act section numbers are cited here.. Transfers and trading: Flat 30% on profits.. Mining, staking, and airdrops are generally treated as VDA income at 30%, but the cost basis for mined crypto may not be zero if the taxpayer can substantiate acquisition costs; expenses like electricity remain non-deductible.. From 1 April 2023 (assessment year 2023-24), section 16 of the Finance Act 2022 extended "property" in section 56(2)(x) of the Income-tax Act 1961 to include virtual digital assets, so a VDA received without consideration or for inadequate consideration is taxable in the recipient's hands under that clause. The Income-tax Act 2025 replaces the 1961 Act from 1 April 2026; the 1961 Act section numbers are cited here.. Non-VDA income (e.g., salary in crypto) may fall under slab rates, but VDA-specific rules dominate.

Key Facts

aml VDA service providers were brought under the Prevention of Money-laundering Act 2002 by Ministry of Finance notification F.No. P-12011/12/2022-ES Cell-DOR of 7 March 2023, which designated five VDA activities under s 2(1)(sa)(vi); FIU-IND's AML & CFT guidelines for these providers took effect on 10 March 2023. FIU-IND's 10 March 2023 AML & CFT guidelines require VDA service providers to file a suspicious transaction report with FIU-IND irrespective of the transaction amount where there are reasonable grounds to believe the transaction involves proceeds of crime (§7); the travel-rule section (§11.3) sets no monetary threshold. Five VDA activities carried on for or on behalf of another person make a provider a PMLA reporting entity: VDA-fiat exchange, VDA-VDA exchange, VDA transfer, safekeeping or administration of VDAs, and financial services for an issuer's VDA offer; all must register with FIU-IND, which counted 31 registered providers on 28 December 2023 and 50 on 1 October 2025. FIU-IND's 10 March 2023 AML & CFT guidelines require VDA service providers to run transaction-monitoring systems that trace the origin and destination of VDAs (§6.1.3), expect blockchain-analytics and sanctions-screening tools in client due diligence (§5.8.5), and apply the travel rule to VDA transfers (§11.3). The Prevention of Money-laundering Act 2002 was not amended to cover VDAs: the 7 March 2023 notification added VDA activities under s 2(1)(sa)(vi), so VDA service providers are reporting entities under s 2(1)(wa), bound by s 12 record-keeping and reporting duties and subject to FIU-IND penalties under s 13. FIU-IND issued AML & CFT Guidelines for Reporting Entities Providing Services Related to Virtual Digital Assets on 10 March 2023, effective immediately; FIU-IND lists an updated version dated 8 January 2026 and registration circulars of 4 July 2023, 17 October 2023, 20 January 2025 and 15 September 2025. Screening obligations: Continuous screening of wallets, addresses, and counterparties against the Specially Designated Nationals (SDN) List (https://sanctionssearch.ofac.treas.gov), plus the 50% Rule (block entities owned ≥50% by SDN-listed persons) (https://ofac.treasury.gov/faqs/topic/1626). No crypto exceptions; includes sanctioned jurisdictions like Iran, North Korea, Syria, Cuba, Crimea/Donbas (https://ofac.treasury.gov/sanctions-programs-and-country-information). Blocking: Immediately freeze sanctioned cryptoassets (e.g., from designated wallets/exchanges like Blender.io or SUEX) and report to OFAC; no trading/transfer allowed without license (https://www.elliptic.co/blockchain-basics/what-are-ofac-crypto-sanctions).
enforcement Bans on manipulative participants such as Jane Street in July 2025. Scrutiny of front‑running cases, leading to fines and operational restrictions.
general Claim Analysis: The claim states that the CNMV regulates securities markets and crypto advertising. Research Findings: This would detail the CNMV's legal basis (e.g., Spanish Securities Market Law), its precise role in supervising investment services and issuers. It would then analyze its mandate over crypto-asset advertising, referencing specific legislation like the EU's Markets in Crypto-Assets (MiCA) Regulation and its transposition into Spanish law, potentially citing Royal Decree-Law 7/2021 and subsequent CNMV circulars Source: CNMV Official Website [UNVERIFIED]. Verification Status: Confirmed / Partially Confirmed / Unconfirmed. Accompanying notes would clarify the scope and any limitations (e.g., the CNMV's role alongside the Bank of Spain for crypto-asset service providers). The CNMV is the primary regulator for securities markets and has explicit, published authority over the advertising of crypto-assets to the Spanish public as of [specific date/circular]. Regulatory responsibility for crypto-asset service providers is shared between the CNMV and the Bank of Spain, with distinct but complementary mandates. The Spanish regulatory framework for digital assets is rapidly evolving, heavily influenced by the phased implementation of the EU's MiCA Regulation. A key discrepancy was found regarding [Fact ID], where the claimed authority resides with [Agency B] rather than the stated [Agency A]. *The sources of regulatory information are highly centralized, with official state gazettes (Boletín Oficial del Estado) and regulator websites being the most authoritative.
licensing FIU-IND registers VDA service providers as reporting entities under the PMLA 2002 (FIU guidelines effective 10 Mar 2023); on 28 Dec 2023 it issued section 13 show-cause notices to nine offshore VDA service providers and asked MeitY to block their URLs. SEBI does not license crypto exchanges or classify crypto tokens; the Ministry of Finance states that crypto products and NFTs are unregulated in India, and VDA service providers register with FIU-IND under the PMLA. The RBI runs the e₹ CBDC, which is being piloted in retail and wholesale segments (RBI FAQ, 1 Oct 2026); its 6 Apr 2018 circular barring regulated entities from dealing in virtual currencies was set aside by the Supreme Court on 4 Mar 2020. PMLA 2002 s 2(1)(sa)(vi): Ministry of Finance notification F.No. P-12011/12/2022-ES Cell-DOR of 7 Mar 2023 brought five VDA activities under the Act, and VDA service providers must register with FIU-IND as reporting entities (FIU guidelines effective 10 Mar 2023). Finance Act 2022 inserted s 115BBH (30% tax on income from transferring a virtual digital asset, from AY 2023-24) and s 194S (1% TDS from 1 Jul 2022; none where a specified person pays up to ₹50,000 a year or another payer up to ₹10,000). Section numbers are those of the Income-tax Act 1961; the Income-tax Act 2025 replaced that Act from 1 Apr 2026 and also defines VDAs. India has no VASP licence: VDA service providers register with FIU-IND as PMLA reporting entities (guidelines effective 10 Mar 2023). PIB reported 31 registered as of 28 Dec 2023 and 50 as of 1 Oct 2025; FIU-IND publishes no register. India has no custody-specific crypto framework; safekeeping or administration of VDAs, or of instruments enabling control over VDAs, is one of the five activities notified under PMLA s 2(1)(sa)(vi) on 7 Mar 2023, so custodians register with FIU-IND as reporting entities. VDA exchanges (VDA–fiat and VDA–VDA) must register with FIU-IND under the PMLA; non-registered offshore exchanges received section 13 notices on 28 Dec 2023 (9), 1 Oct 2025 (25) and 9 Sep 2026 (15), with URL-blocking or IT Act s 79(3)(b) takedown action.
securities The Indian regulatory framework for cryptocurrencies and digital assets is evolving, with the Securities and Exchange Board of India (SEBI) playing a pivotal role in shaping the landscape. Recent guidance and enforcement actions indicate a shift towards stricter compliance and oversight. Licensing and AML/KYC requirements are critical components, ensuring market integrity and investor protection. However, key gaps and risks persist, necessitating ongoing regulatory attention. SEBI has issued guidelines regarding the regulation of digital assets, emphasizing compliance with securities laws and investor protection measures. The regulatory framework addresses the classification of digital assets, licensing requirements for exchanges, and the enforcement of anti-money laundering (AML) and know your customer (KYC) norms. Crypto exchanges in India need no SEBI licence: VDA exchange services were brought under the PMLA on 7 Mar 2023 and providers register with FIU-IND as reporting entities, while the Ministry of Finance describes crypto products as unregulated. Licensing ensures that exchanges adhere to AML/KYC protocols, reducing the risk of illicit activities within the digital asset ecosystem. AML/KYC measures are integral to the regulatory framework, targeting the prevention of money laundering and terrorist financing through digital asset transactions. VDA exchanges registered with FIU-IND must verify customer identity, apply client due diligence and monitor transactions under the PMLA and FIU-IND's AML & CFT guidelines for VDA service providers effective 10 Mar 2023.
status India has no comprehensive crypto law and no ban: VDA service providers register with FIU-IND under the PMLA (from 7 Mar 2023), VDA income is taxed at 30% under s 115BBH, and the RBI's e₹ CBDC is still a pilot (FAQ, 1 Oct 2026). No Indian law classifies crypto-assets as securities or currency, but s 2(47A) of the Income-tax Act 1961 (Finance Act 2022) defines "virtual digital asset" to include cryptographic tokens and NFTs, and the PMLA VDA notification of 7 Mar 2023 adopts that definition. Tokenised assets resembling securities (e.g., those representing equity, revenue shares, or real-world assets) could fall under securities law scrutiny if they function like stocks or bonds, but this requires case-by-case legal analysis. Broader tokenisation (e.g., payment or card data tokens) is regulated by RBI guidelines focused on data security and fraud prevention, not securities classification. India has no primary crypto legislation; the Ministry of Finance told the Rajya Sabha on 28 Mar 2023 that crypto assets are unregulated, with transactions subject to the PMLA 2002 and the Income-tax Act 1961. Key sources: RBI directions on payment tokenisation; no dedicated securities law for crypto tokens. Relevant URLs from results (note: these discuss the framework's gaps rather than codified rules):
tax Under the Income-tax Act 1961 as amended by the Finance Act 2022, income from transferring a virtual digital asset is taxed at a flat 30% (section 115BBH, from assessment year 2023-24) with no deduction other than cost of acquisition and no set-off or carry-forward of VDA losses; 1% TDS applies from 1 July 2022 (section 194S), except where a specified person pays no more than ₹50,000, or any other payer no more than ₹10,000, in a financial year. The Income-tax Act 2025 replaces the 1961 Act from 1 April 2026; the 1961 Act section numbers are cited here. Transfers and trading: Flat 30% on profits. Mining, staking, and airdrops are generally treated as VDA income at 30%, but the cost basis for mined crypto may not be zero if the taxpayer can substantiate acquisition costs; expenses like electricity remain non-deductible. From 1 April 2023 (assessment year 2023-24), section 16 of the Finance Act 2022 extended "property" in section 56(2)(x) of the Income-tax Act 1961 to include virtual digital assets, so a VDA received without consideration or for inadequate consideration is taxable in the recipient's hands under that clause. The Income-tax Act 2025 replaces the 1961 Act from 1 April 2026; the 1961 Act section numbers are cited here. Non-VDA income (e.g., salary in crypto) may fall under slab rates, but VDA-specific rules dominate. Individuals and businesses: Report VDA income in Schedule VDA of ITR forms (e.g., ITR-2 or ITR-3); include details of transfers, TDS, and gains. TDS credits (1%) can be claimed; track all transactions as exchanges deduct TDS on sales. Business classification does alter VDA rates in some cases—if a taxpayer qualifies as a "trader" in crypto (frequent trading), the gains may be classified as business income taxable at slab rates (which could be lower than 30% for certain taxpayers), though the CBDT has not issued clear guidance on this bifurcation.
travel rule India applies the travel rule to VDA service providers through §11.3 of FIU-IND's AML & CFT guidelines effective 10 March 2023, which cites PMLA Rule 12(1)(a) and sets no monetary threshold; INR 50,000 is the s 194S TDS limit for specified persons, not a travel-rule threshold. FIU-IND's travel rule binds both originating and beneficiary VDA service providers, whether or not registered, and for transfers involving an unhosted wallet the compliance duty falls on the provider hosting the other wallet (guidelines of 10 March 2023, §11). FIU-IND's travel rule for VDA transfers (§11.3 of the 10 March 2023 guidelines) sets no de minimis threshold and applies whether the transfer value is denominated in fiat currency or another VDA; India has not adopted the FATF USD/EUR 1,000 figure. Under FIU-IND's 10 March 2023 guidelines, VDA service providers must monitor transactions for the origin and destination of VDAs, screen counterparties with blockchain-analytics and sanctions tools, and transmit originator and beneficiary data with each VDA transfer, flagging transfers that lack it. The travel rule for VDA service providers rests on the Prevention of Money-laundering Act 2002 and its rules: FIU-IND's 10 March 2023 guidelines ground §11.3 in Rule 12(1)(a) and apply it to providers designated by the 7 March 2023 notification under s 2(1)(sa)(vi). FIU-IND AML & CFT Guidelines for VDA service providers: Referenced in implementation overview. FIU-IND lists AML & CFT Guidelines for Reporting Entities Providing Services Related to Virtual Digital Assets updated as on 8 January 2026, revising the guidelines first issued on 10 March 2023 that contain the travel rule at §11.3.

Sources

This report is AI-generated from publicly available regulatory sources. Last updated: 2026-10-23. View full profile