Taxed, not licensed
India’s approach is unusual: the tax code recognises and taxes virtual digital assets in detail, while there is no comprehensive licensing or conduct regime for trading them. Service providers are brought into the perimeter through anti-money-laundering law rather than financial-services law.
The 30% and the 1%
Income from the transfer of a virtual digital asset is taxed at a flat 30%, regardless of the taxpayer’s slab. Two features make this materially harsher than it first appears. No deduction is allowed except the cost of acquisition — not exchange fees, not infrastructure costs. And losses from virtual digital assets cannot be set off against other income, nor, per the provision as enacted, against gains from other virtual digital assets.
Separately, Section 194S imposes a 1% Tax Deducted at Source on the transfer of a virtual digital asset above the applicable threshold. TDS is not an additional tax on profit; it is withholding against eventual liability, creditable on the return. But because it applies to the transaction value rather than the gain, it has a pronounced effect on high-frequency trading, which was widely understood to be part of its purpose.
AML registration
Virtual digital asset service providers are reporting entities under the Prevention of Money Laundering Act and must register with the Financial Intelligence Unit — India. This applies to offshore platforms serving Indian users as well as domestic ones, and FIU-IND has acted against non-compliant offshore providers.
WazirX
The most consequential recent event for Indian users was not a rule change but an incident. WazirX suffered a large multi-signature compromise in July 2024 and subsequently entered a court-supervised restructuring process. Conisec logs that incident in the Incident Tracker. It is a practical illustration of what the absence of a conduct-and-custody regime means when a platform fails: recovery proceeds through insolvency-style processes rather than through a regulator-supervised resolution.
Sources
- Income Tax Department (India), Income tax provisions relating to virtual digital assets (1 Jan 2026)
- Financial Intelligence Unit — India, Reporting entity registration (1 Jan 2026)
Not legal or tax advice. This is a summary of published rules, not legal or tax advice. Rules change; check the primary sources linked above.
Last reviewed by Conisec Staff. Review cadence: Quarterly.