'Taxed as Legal, Regulated as Illegal': Raghav Chadha Urges Govt for Legal Recognition of VDAs

Rajya Sabha MP Raghav Chadha during the Budget discussion in the Parliament urged the government to improve regulations around Virtual Digital Assets(VDAs) like cryptocurrency and stablecoins.

He said, “India taxes VDAs like they are legal. But regulate it like they are illegal,” adding that the lack of a proper regulatory framework around these assets is causing Indian investors and crypto firms to shift operations offshore.

The AAP MP highlighted that around ₹4.8 lakh crore in VDA have been moved offshore due to lack of proper regulatory framework. He added that around 12 crore Indians have switched to overseas platforms for crypto trading.

Around 180 Indian crypto start-ups have moved abroad to safer regulatory regions such as Dubai, Singapore and Malaysia, Chadha stated. He added that 73% of India's crypto trading volume has already moved to foreign exchange.

"The government taxes cryptocurrency at 30% Capital Gain Tax + 1% TDS, yet offers no legal recognition, no investor protection, no dedicated AML framework," Chadha added.

Proposed Solution

In his Parliament speech, Chadha called for a clear compliance framework for VDAs and urged the government to give it a clear asset class status in India.

The MP stated that a clear domestic regulatory sandbox with strong anti-money laundering (AML) guardrails would potentially boost annual tax revenue by ₹15,000-20,000 crore and allow VDA activity to return to India, improve compliance and protect investors interest.

Current Regulations on VDAs

In India, VDAs like cryptocurrencies, stablecoins and NFTs are not regulated but are taxed. There is no dedicated law around the asset category but the government has still integrated it into the existing tax and anti-money laundering frameworks.

Under the Finance Act 2022, the government introduced a strict tax regime for VDAs that levies flat 30% tax on any income from the transfer of VDAs. Additionally, losses from one VDA cannot be used to offset profits from another.

On VDA transactions exceeding ₹10,000 in a financial year, a 1% Tax Deducted at Source (TDS) applies. VDAs received as gifts are also taxable in the hands of the recipient.

Since March 2023, the VDAs have fallen under the governance of Prevention of Money Laundering Act (PMLA). VDA Service Providers (VASPs), which include exchanges, wallet providers, and custodians, shall strictly register with the Financial Intelligence Unit-India (FIU-IND).