VDA

Crypto & Virtual Digital Assets in India What are Virtual Digital Assets (VDAs)? VDAs are digital representations of value that can be traded or transferred. This includes: Cryptocurrencies: Bitcoin, Ethereum, Solana Tokens: Utility tokens, NFTs, Stablecoins DeFi Assets: Governance tokens, liquidity provider tokens India’s crypto market: ~$6.5 billion (2024), ~15-20 million investors. RBI vs SEBI Jurisdiction RBI’s Stance (2020-2024) April 2018: RBI banned banks from dealing with crypto (overturned by Supreme Court, March 2020) May 2023: RBI expressed “serious concerns” about crypto CBDC Pilot: Digital Rupee pilot launched (2022) SEBI’s Role October 2023: SEBI granted regulatory powers over crypto Crypto Asset Classification: Securities or commodities determination pending Investor Protection: SEBI to regulate as and when notified Tax Framework (2024) Income Tax Provisions 30% Tax: On gains from VDA transfers (Section 115BBH) 1% TDS: On payments for VDA above ₹10,000 (Section 194S) No Deduction: Losses cannot be set off against other income Gift Tax: VDA gifts taxable as income Tax Calculation Example 1 2 3 4 Investment: ₹1,00,000 → Sold for ₹2,00,000 Gain: ₹1,00,000 Tax @30%: ₹30,000 (plus surcharge if applicable) Net After Tax: ₹70,000 Regulatory Landscape What’s Allowed (2024) Buying/selling VDAs on registered exchanges Holding VDAs in self-custody wallets Crypto as payment (not legally recognized) CBDC (RBI’s digital rupee) What’s Prohibited Crypto as legal tender Unregistered exchange operations Anonymous transactions (PMLA compliance required) Advertising crypto to retail investors (by exchanges) How Crypto Exchanges Work Indian Exchanges (SEBI-Registered) WazirX: Largest by volume (acquired by Binance) CoinDCX: Institutional focus ZebPay: Oldest Indian exchange Unocoin: Bitcoin-only specialist Process KYC: Mandatory Aadhaar, PAN verification Bank Link: Add bank account for INR transfers Buy/Sell: Market orders, limit orders Storage: Exchange wallet or self-custody Consumer Rights & Risks Investor Protections (Limited) KYC Compliance: Exchanges must verify identity SUSPICIOUS Transaction Reports: AML monitoring Grievance Redressal: Exchange-level + Consumer Court Major Risks Price Volatility: 50%+ swings in days Hacking Risk: Exchange breaches (Mt. Gox, WazirX 2024) No Legal Recourse: Crypto transactions not legally enforceable Scams: Ponzi schemes, rug pulls, fake exchanges Tax Complexity: Multiple forms, audit requirements Safe Practices Use SEBI-Registered Exchanges Only Enable 2FA: Prefer hardware wallets for large holdings Self-Custody: Consider cold wallets for long-term holding Start Small: Allocate only what you can afford to lose Document Everything: For tax compliance Reporting Issues SEBI: For exchange-related complaints (https://sebi.gov.in) Cyber Crime: For hacking/fraud (https://cybercrime.gov.in) Income Tax: For TDS/tax issues Consumer Court: For deficiency in service Prime References SEBI on Virtual Digital Assets - Regulatory framework Income Tax Department - Crypto Tax - Section 115BBH RBI CBDC - Digital Rupee FINNET - AML compliance This 101 guide is part of CashlessConsumer’s fintech education initiative. Last updated: March 2026. ...