New regulations have brought virtual assets under money laundering laws as part of a crackdown on crypto.

The Ministry of Finance has issued a recent notification stating that businesses that provide services related to Virtual Digital Assets (VDA), such as cryptocurrencies, will now fall under the ambit of the Prevention of Money Laundering Act (PMLA). This means that any services related to trading in VDA-fiat, VDA-VDA, or storing and managing VDA will be dealt with under the PMLA. The notification clarifies that "virtual digital asset" has the same meaning as assigned to it in Clause (47A) of Section 2 of the Income-Tax Act of 1961. Failure to pay TDS on crypto transactions, or transactions where the payment is in kind under Section 194S(1), can result in imprisonment for up to seven years. The Union Budget of 2022-23 introduced a 30% income tax on profit from the sale of VDAs, including cryptocurrencies and NFTs, and a 1% Tax Deducted at Source (TDS) on VDA transfers under section 194S of the Income Tax Act. Clause 119 of the Finance Bill 2023 proposes amending the provisions related to TDS payments to the Central Government.