India's Crypto Tax Overhaul Leaves Cross-Border Issues Unresolved

India's new Income Tax Act 2025 has introduced significant changes to taxing virtual digital assets (VDAs), including a flat 30% tax rate and a prohibition on loss set-off. However, despite these updates, several unresolved issues remain, particularly in the context of cross-border transactions, decentralized finance (DeFi) participation, mining and staking income, airdrop taxation, and India's forthcoming obligations under the OECD Crypto-Asset Reporting Framework (CARF).

The Act retains the 30% tax rate on VDA income, with an effective rate of 31.2% when adding the 4% Health and Education Cess. The tax regime also prohibits set-off of VDA losses against other types of income or capital gains, a restriction that has been carried forward from the Finance Act 2022.

The Central Board of Direct Taxes (CBDT) notified the Income Tax Rules, 2026 on March 20, providing procedural scaffolding for the new framework. However, several open issues remain unresolved, including the taxation of cross-border transactions and DeFi participation.