India Cracks Down Hard on Crypto-Linked Drug Trafficking

Increased Surveillance on Darknet Transactions

The Narcotics Control Bureau (NCB) of India is ramping up its efforts to monitor cryptocurrency transactions on the darknet. This move is part of a broader strategy to combat drug trafficking in the country. Recent reports indicate that India has experienced around 92 incidents between 2020 and April 2024 where drugs were purchased using cryptocurrencies on the dark web.

Government Response and Action Plans

Nityanand Rai, the Minister of State for Home Affairs, has outlined India’s comprehensive plan to tackle drug trafficking and its link with cryptocurrencies. During a parliamentary session, Rai revealed that the Indian government has devised 13 action plans to address the growing issue of drug trafficking. Notably, two of these plans focus specifically on the misuse of cryptocurrencies. To enhance monitoring, a Special Task Force on Darknet and Cryptocurrency has been established to oversee suspicious drug-related transactions on the dark web. Additionally, the NCB is providing training in cryptocurrency, darknet operations, and digital forensics to better equip law enforcement personnel.

Unchanged Cryptocurrency Tax Regulations

India’s stance on cryptocurrency taxation remains firm. In the recent budget for the 2024-25 fiscal year, Finance Minister Nirmala Sitharaman did not propose any changes to the current tax regime for cryptocurrencies. Consequently, crypto investors in India continue to face a 1% tax on each transaction. Profits from trading or transferring cryptocurrencies are taxed at a high rate of 30%, and losses cannot be offset against other types of income, such as salary or business earnings. Additionally, these losses cannot be carried forward to future years.

Conclusion

India's increased scrutiny of crypto transactions linked to drug trafficking highlights the government's commitment to combating illegal activities involving digital currencies. Despite these efforts, the country's strict cryptocurrency tax regulations remain unchanged, maintaining a high burden on crypto investors. As India continues to navigate the challenges posed by digital assets, both regulatory and enforcement measures are likely to evolve to address emerging issues in the crypto space.