**Executive Summary**
This document is the answer to an unstarred question in Lok Sabha (No. 309) regarding investments in crypto currencies, and steps taken by the government to control the misuse of digital assets, crypto currencies and Non-Fungible Tokens (NFTs). Although crypto-assets/Virtual Digital Assets (VDAs), including Non-Fungible Tokens (NFTs), are unregulated in India, the government has brought the sector under regulatory ambit of the Financial Intelligence Unit (FIU-IND). The government also monitors tax evasion, and encourages voluntary compliance and enhanced awareness regarding proper reporting of VDA transactions and payment of due taxes.
**Key Points / Main Content**
* **Regulation and Monitoring:**
* Crypto-assets/Virtual Digital Assets (VDAs), including NFTs, are currently unregulated in India.
* The government does not collect data on these assets.
* The sector falls under the Financial Intelligence Unit's (FIU-IND) regulatory ambit for anti-money laundering (AML) and combating the financing of terrorism (CFT).
* VDA service providers (VDASPs) are subject to registration, customer due diligence, record-keeping, and suspicious transaction reporting obligations.
* **FIU-IND Role:**
* As the AML/CFT regulator, FIU-IND receives and analyses suspicious transaction reports from VDASPs.
* FIU-IND disseminates actionable intelligence with law enforcement agencies to curb money laundering and terror financing.
* FIU-IND has taken action under Section 13 of the PMLA, 2002, against non-compliant VDASPs.
* **Enforcement Directorate Actions:**
* The Enforcement Directorate has investigated crypto-related cases under PMLA.
* They have attached/seized/frozen proceeds of crime worth Rs. 4209.74 crore, arrested 29 persons, and filed 24 prosecution complaints.
* One accused has been declared a Fugitive Economic Offender.
* **Tax Compliance:**
* The Central Board of Direct Taxes (CBDT) has detected cases of tax evasion linked to VDAs and taken action as per the Income Tax Act, 1961.
* The CBDT's NUDGE campaign promotes voluntary compliance and awareness regarding VDA transaction reporting and tax payment.
* Data analytics tools are used to match VDA transaction information with disclosures in Income Tax Returns (ITRs).
* The Prohibition of Benami Property Transactions Act, 1988, and the Black Money Act, 2015, apply to VDAs.
* **RBI Warnings and Guidance:**
* The Reserve Bank of India (RBI) has cautioned users, holders, and traders of VDAs about the potential risks involved.
* RBI advised its regulated entities (May 31, 2021) to continue customer due diligence for VDA transactions, aligned with KYC, AML, and CFT regulations.
**Impact Analysis**
**Virtual Digital Asset Service Providers (VDASPs)**
* **Impact:** Required to comply with registration, customer due diligence, record-keeping, and suspicious transaction reporting obligations. Subject to action under Section 13 of the PMLA if non-compliant.
* **Action Required:** Register, implement customer due diligence, maintain records, and report suspicious transactions.
**Taxpayers dealing with VDAs**
* **Impact:** Taxpayers are required to report VDA transactions in their Income-tax Returns.
* **Action Required:** Disclose VDA transactions in Schedule VDA of Income-tax Returns and pay due taxes.
**Users, holders, and traders of VDAs**
* **Impact:** Subject to potential economic, financial, operational, legal, customer protection and security related risks.
* **Action Required:** Exercise caution and understand the risks involved in dealing with VDAs.
**RBI regulated entities**
* **Impact:** They need to continue to carry out customer due diligence processes for transactions in VDAs, in line with regulations governing standards for Know Your Customer (KYC), Anti- Money Laundering (AML), Combating of Financing of Terrorism (CFT), obligations under Prevention of Money Laundering Act (PMLA), 2002, etc.
* **Action Required:** Continue implementing customer due diligence processes for VDA transactions.
Key Entities Referenced
Financial Intelligence Unit (FIU-IND): AML/CFT regulator that oversees VDA service providers (VDASPs) and combats money laundering and terror financing.
Prevention of Money Laundering Act (PMLA), 2002: Law under which FIU-IND takes action against non-compliant VDASPs and the Enforcement Directorate investigates crypto-related cases.
Virtual Digital Assets (VDAs): Includes crypto-assets and Non-Fungible Tokens (NFTs), which are the subject of regulation and monitoring for money laundering and tax evasion.
Income Tax Act, 1961: Law under which the Income Tax Department takes action against tax evasion related to VDAs.
Reserve Bank of India (RBI): Advises its regulated entities to carry out customer due diligence for transactions in VDAs.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
LOK SABHA
UNSTARRED QUESTION NO. 309
TO BE ANSWERED ON 02.02.2026/ 13 Magha 1947 (Saka)
Investments made Through Crypto Currencies
309 Dr. T Sumathy Alias Thamizhachi Thangapandian:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government has taken serious note on the huge investments made through crypto
currencies, digital assets, fuel money laundering and illicit trades; and
(b) if so, the steps taken by the Government to control the misuse of digital assets, crypto
currencies and Non-Fungible Tokens (NFTs)?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) & (b): Crypto-assets/Virtual Digital Assets (VDAs), including Non-Fungible Tokens (NFTs),
are unregulated in India, and the government does not collect data on these assets. However,
notwithstanding this, the Government has brought the sector under the Financial Intelligence
Unit’s (FIU-IND) regulatory ambit for anti-money laundering (AML) and combating the
financing of terrorism (CFT) purposes, making VDA service providers (VDASPs) subject to
registration, customer due diligence, record-keeping and suspicious transaction reporting
obligations. Being the AML/CFT regulator, FIU-IND receives and analyses suspicious
transaction reports submitted by VDASPs and disseminates actionable intelligence with law
enforcement agencies to curb money laundering and terror financing activities. While FIU-IND
has taken action under Section 13 of the PMLA, 2002, against non-compliant VDASPs, the
Enforcement Directorate has also investigated several crypto-related cases under PMLA,
attaching/seizing/freezing proceeds of crime worth Rs. 4209.74 crore, arresting 29 persons, and
filing 24 prosecution complaints. One accused has been declared a Fugitive Economic Offender.Additionally, cases of tax evasion linked to VDAs have been detected by the Central Board of
Direct Taxes (CBDT) on multiple occasions, and the Income Tax Department takes appropriate
action as per the Income Tax Act, 1961. Wherever tax evasion is detected, necessary action, such
as nudging taxpayers, e-verification, reassessment, survey, or search and seizure, is taken. The
CBDT’s NUDGE (Non-Intrusive Usage of Data to Guide and Enable) campaign has been
launched to encourage voluntary compliance and enhance awareness regarding proper reporting
of VDA transactions and payment of due taxes. Under this initiative, communications have been
issued to identified taxpayers who carried out VDA transactions but did not disclose them in
Schedule VDA of their Income-tax Returns. Data analytics tools, Project Insight and internal
databases are used to match information on VDA transactions with disclosures in ITRs.
Furthermore, the Prohibition of Benami Property Transactions Act, 1988, and the Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, apply to all assets,
including VDAs. The Benami Act enables prosecution where assets, including VDAs, are held
benami, and the Black Money Act enables action against undisclosed foreign assets, including
VDAs.
The Reserve Bank of India (RBI) has also cautioned users, holders and traders of VDAs vide its
several public notices that dealing in these assets is associated with potential economic, financial,
operational, legal, customer protection and security related risks. RBI, vide its circular dated
May 31, 2021, has also advised its regulated entities to continue to carry out customer due
diligence processes for transactions in VDAs, in line with regulations governing standards for
Know Your Customer (KYC), Anti- Money Laundering (AML), Combating of Financing of
Terrorism (CFT), obligations under Prevention of Money Laundering Act (PMLA), 2002, etc.
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