Key Highlights
- India’s new income tax rules bring crypto, CBDCs, and electronic money products under the FATCA/CRS reporting framework.
- The Asset Tokenization (Regulation) Bill, 2026, introduced in Rajya Sabha, proposes a multi-regulator model for tokenized real-world assets.
- India ranks first globally in grassroots crypto adoption per Chainalysis data, with transaction volumes exceeding ₹50,000 crore in FY 2024-25.
Jaideep Reddy, Partner at Trilegal and one of the lawyers who represented the crypto industry in the landmark 2020 Supreme Court case that overturned the Reserve Bank of India’s (RBI) banking ban, sees India’s expanded tax reporting rules as part of a necessary global alignment rather than a punitive move.
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Speaking on CNBC TV18’s Crypto Corner, Reddy described the March 2026 CBDT amendment—which brought crypto assets, CBDCs, and specified electronic money products under Rules 114F, 114G, and 114H of the Income Tax Act—as India joining a “multilateral movement” led by the OECD.
The rules expand the definition of financial assets to include relevant crypto assets and incorporate CBDCs and specified electronic money products into the reporting framework used by financial institutions under both FATCA and the OECD’s Common Reporting Standard.
The practical effect: crypto holdings on Indian exchanges, CBDC wallets, and qualifying digital money products are now systematically reportable—not just to Indian tax authorities but also to foreign jurisdictions through existing information-sharing treaties. India has committed to begin cross-border crypto data exchange under CARF by April 2027, as Top Coin Daily previously reported.
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“It’s a positive trend,” Reddy said. “Hopefully, it’s the first of such multilateral steps. This is, of course, in the taxation realm, but hopefully it will move towards the regulatory realm as well.”
Adoption thrives despite restrictive taxes
Reddy acknowledged that India’s crypto market has grown significantly since the 2020 Supreme Court judgment, which established that carrying on crypto business is a fundamental right that cannot be unreasonably restricted. Transaction volumes crossed ₹50,000 crore in FY 2024-25, and Chainalysis data ranks India first globally in grassroots crypto adoption, with Bitcoin and stablecoins dominating 70% of transactions.
However, the taxation regime remains “very restrictive compared to global norms,” Reddy noted. The 30% flat tax on gains and 1% TDS on every transaction — introduced in 2022 — have driven an estimated 72.7% of India’s crypto trading volume offshore, with traders migrating to foreign exchanges that operate outside India’s regulatory reach. Budget 2026 added penalty provisions—₹200 per day for failure to report and ₹50,000 for incorrect reporting—but offered no relief on tax rates, drawing criticism from industry bodies.
Despite this, Reddy emphasized that adoption extends far beyond trading and speculation. “There is a huge amount of software developers programming on this technology,” he said, pointing to the upcoming ETH DevCon conference in Mumbai in November as evidence that India’s blockchain developer ecosystem rivals its early 2000s IT boom. With nearly 12 crore Indians already investing in crypto and over 75,000 blockchain professionals in the country, the grassroots momentum appears self-sustaining regardless of policy headwinds.
Tokenization bill gets the conversation going — but it’s no sure thing
Reddy also addressed the Asset Tokenisation (Regulation) Bill, 2026, introduced in Rajya Sabha on March 14 by AAP MP Raghav Chadha. The 27-section, 11-chapter draft proposes a comprehensive statutory framework covering the issuance, trading, custody, and settlement of tokenized real-world assets—from real estate and commodities to carbon credits and intellectual property. It proposes a novel multi-regulator model and provides a pathway for regulating tokenized assets, including stablecoins.
But Reddy offered a critical caveat: “It’s a private member’s bill. So it does get the conversation going, but whether it will actually have the traction to go through remains to be seen.” To give more context to this statement, since India’s independence in 1947, only 14 private member’s bills have become law in India—the last to pass both houses was in 1970.
Still, the bill reflects a global wave. Reddy pointed to the U.S. Securities and Exchange Commission’s moves to integrate tokenization into securities infrastructure, the EU’s Markets in Crypto-Assets (MiCA) regulation, and the IFSCA’s own consultation paper on tokenization from Gift City as evidence that India’s interest in real-world asset (RWA) tokenization is not isolated. The bill’s real value, Reddy suggested, may be in creating legislative vocabulary and political pressure for government action — even if it never passes in its current form.
The missing piece: Regulation
The overarching theme of Reddy’s remarks was the gap between India’s aggressive taxation posture and its absent regulatory framework. The country now taxes crypto at 30%, tracks it through TDS, reports it under FATCA/CRS, and will soon share data globally under CARF. But it still has no dedicated law defining what crypto assets are, what rights holders have, or how markets should operate.
“The technology is in its early stages, but the signs are quite promising,” Reddy said, while making clear that taxation alone is not regulation. Until India bridges that gap, it will continue to operate in an uncomfortable middle ground—collecting revenue from an industry it has chosen not to formally recognize.
Also Read: India’s Crypto Policy Delayed Again as RBI Blocks Discussion Paper
