Taxation of Cryptocurrencies

Abstract

This paper revolves around the evolving policies of India regarding cryptocurrencies and blockchain technology are extensively analyzed in this study with an objective to establish a dynamic and sustainable regime.India currently follows an observational or wait-and-watch approach instead of an active regulatory role, as per a review of government statements, legislative measures1, and infrastructure initiatives. The thesis focuses specifically on the taxation of crypto-assets in the Indian scenario. It examines critically the current tax provisions under the Income Tax Act and the Finance Act, 2022,where cryptocurrencies have been categorized as Virtual Digital Assets (VDAs)2, thus making them subject to special taxation and reporting requirements. The research assesses how these provisions relate to wider regulatory and economic goals, including investor protection, financial stability, and technological advancement. This study suggests a two-character regulatory framework for cryptocurrencies depending on their function and usage. This purpose-based, time-bound categorization aims to offer clarity and adaptability so that policymakerscan modify rules for the changing applications of digital assets.