Introduction
China Bitcoin sale has triggered global headlines—and Indian taxpayers are watching closely. As China’s government sells crypto assets despite its trading ban, many are asking: how would Indian laws respond to such a situation? Let’s break it down.
Why Is China Selling Bitcoin?
- Over 194,000 BTC reportedly held by Chinese authorities—seized from past criminal cases.
- Estimated value: $16 billion
- Purpose: Raise funds amid budget deficits, slowing growth
- Sold via private firms to bypass trading ban
India angle: If Indian authorities were to seize crypto, would the government follow suit?
Crypto Seizures in India: What’s the Legal Stand?
- Under Indian law, crypto is not illegal, but it’s heavily regulated.
- Agencies like ED and Income Tax Dept can seize virtual assets under:
- PMLA (Prevention of Money Laundering Act)
- Income Tax Act (for evasion-related seizures)
- Seized assets are treated as property—disposal needs court orders.
Expert View:
“Unlike China, Indian agencies must follow due judicial process before monetising seized crypto,” says CA Radhika Jain, forensic tax consultant.
Tax Treatment of Crypto in India
As per Budget 2022 amendments:
| Category | Tax Treatment |
|---|---|
| Gains from transfer | Taxed at 30% under Section 115BBH |
| No deduction allowed | Except cost of acquisition |
| 1% TDS | Under Section 194S on sale proceeds |
| Gifts in crypto | Taxable in hands of recipient |
Important: Losses from crypto can’t be offset against any other income.
Could Indian Govt Sell Seized Crypto in Future?
Technically yes, but here’s how it would differ from China:
- India needs due process: Seized crypto must be declared as proceeds of crime by a court.
- Auction route preferred: As seen in past gold seizures, disposal usually happens via public auction.
- Valuation challenges: Price volatility and custody/security of digital wallets complicate the process
Regulatory Gap: What Needs Clarity
- No specific guidelines yet on handling, storing, or auctioning seized crypto.
- Income-tax Act and PMLA are being interpreted for crypto, but lack targeted provisions.
- A clear RBI/SEBI-CBDT protocol may emerge as India prepares its Digital India Act.
What Indian Crypto Holders Should Learn
✅ Keep digital asset transactions clean—record PAN, wallet IDs, and transaction trails
✅ File crypto gains clearly in ITR under Schedule VDA
✅ Avoid unregistered exchanges or P2P routes
✅ Don’t ignore 1% TDS, even for small trades