In March 2026, Rajesh Mehta from Pune invested ₹8.4 lakh in a Telegram crypto group promising 40% monthly returns. Within 72 hours the admin vanished, his USDT wallet emptied, and the exchange URL went offline. Rajesh received no tax invoice, no TDS certificate, and discovered other victims across Maharashtra—mostly middle-class professionals who believed 'crypto is unregulated so no accountability exists.'
Citizen Crisis Response Network (CCRN) is a volunteer legal aid platform helping Indians file First Information Reports, draft Right to Information applications, and assert statutory rights when public systems fail.
As of 2026, all virtual digital asset (VDA) income in India attracts 30% tax under Section 115BBH of the Income-tax Act 1961, with 1% TDS under Section 194S; no set-off of losses is permitted. Crypto scams are prosecuted as cheating under Section 318 of the Bharatiya Nyaya Sanhita 2023 (BNS), and the FIR is registered under Section 173 of the Bharatiya Nagarik Suraksha Sanhita 2023 (BNSS). Victims should preserve wallet addresses, transaction hashes, and chat screenshots, lodge cybercrime complaints on https://cybercrime.gov.in as early as possible, and may file RTI with the Financial Intelligence Unit-India to seek information on fund flows.
India's crypto regulation is a patchwork of tax law, criminal law, and anti-money-laundering rules. The Finance Act 2022 inserted Section 115BBH into the Income-tax Act 1961, defining “Virtual Digital Asset” and imposing a flat 30% tax on transfer income, effective April 1, 2022 and continuing into 2026. Section 194S mandates 1% TDS by the payer (exchange or counter-party) on the consideration for transfer of a VDA, subject to the prescribed annual thresholds.
The Bharatiya Nyaya Sanhita 2023 (BNS) replaced the IPC with effect from 1 July 2024. Crypto fraud prosecutions now invoke Section 318 BNS (cheating, with sub-section (4) covering cheating and dishonestly inducing delivery of property) and Section 319 BNS (cheating by personation). The Bharatiya Nagarik Suraksha Sanhita 2023 (BNSS) replaced the CrPC; under Section 197 BNSS an offence is ordinarily tried where it was committed, and under Section 199 BNSS it may also be tried where the consequence of the offence ensued—useful where a crypto scam spans multiple states.
The Prevention of Money Laundering Act 2002 (PMLA) applies when a scheduled (predicate) offence is attracted, including in cross-border crypto frauds. The Financial Intelligence Unit-India (FIU-IND), under the Ministry of Finance, collects Suspicious Transaction Reports (STRs) from reporting entities, including crypto exchanges registered with FIU-IND. Citizens may file RTI applications to FIU-IND seeking information on whether an STR was filed against a suspect wallet address, though certain details may be exempted under Section 8(1)(h) of the RTI Act 2005.
Warning — Do not assume crypto transactions are invisible to Indian authorities. KYC-compliant exchanges report high-value financial transactions to the Income Tax Department under the Statement of Financial Transaction framework (Section 285BA of the Income-tax Act), and investigating agencies use blockchain analytics to trace fund flows.
Section 2(47A) of the Income-tax Act defines VDA broadly to include:
Excluded by notification are Indian or foreign currency (fiat) and gift cards, vouchers, mileage/reward points and similar instruments that the Central Government has carved out.
Stablecoins pegged to fiat (USDT, USDC) and DeFi tokens generally fall within the VDA definition for tax purposes.
Section 115BBH:
Section 194S:
Example calculation (FY 2026-27):
Priya buys 0.5 BTC at ₹18,00,000 in June 2026, sells at ₹24,00,000 in November 2026.
Priya must report this under Schedule VDA in ITR-2 or ITR-3. Failure to report can invite reassessment proceedings and penalty for under-reporting/mis-reporting of income under Section 270A.
Most citizens miss this — Even if you make a loss on crypto, you may still need to file ITR (for example, where TDS was deducted or your total transaction value crosses the reporting thresholds). Non-filing can trigger a notice under Section 142(1).
For guidance on filing RTI to verify TDS credits, see RTI Assistant (drafter) and PIO Reply Checker.
Guaranteed returns: Any promise of fixed daily/weekly returns (e.g., “3% daily, 90% monthly”) is a Ponzi scheme. Legitimate crypto assets are volatile and offer no guarantees.
Unregistered platforms: Check https://fiuindia.gov.in for reporting entities registered with FIU-IND. Scam platforms mimic legitimate URLs (e.g., “wazirx-india.com” vs. “wazirx.com”).
No KYC or instant KYC bypass: Scammers avoid KYC to prevent traceability. If an app lets you trade large amounts without Aadhaar/PAN, treat it as a red flag.
Telegram/WhatsApp “VIP groups”: Fraudsters create urgency (“Only 10 slots left!”), use fake testimonials, and disappear after the initial deposit. Always independently verify the admin's identity.
Recovery fee scams: After the initial scam, a second fraudster poses as a “recovery agent” demanding upfront fees. This is a sequential scam; no legitimate recovery service charges before fund retrieval.
Pump-and-dump schemes: Coordinated buying of low-cap tokens on decentralized exchanges (DEX) to inflate price, then mass sell-off. Retail investors are left holding worthless tokens.
Do this immediately — Screenshot all chat messages, save wallet addresses in a plain text file, record transaction hashes from blockchain explorers (Etherscan, Blockchain.com), and preserve video calls or voice notes. Electronic records are admissible under Section 63 of the Bharatiya Sakshya Adhiniyam 2023 (which replaced the Indian Evidence Act 1872), subject to the prescribed certificate.
Jurisdiction:
Under Section 197 BNSS an offence is ordinarily tried where it was committed; under Section 199 BNSS it may also be tried where the consequence ensued (e.g., where your bank account was debited). In crypto scams spanning multiple states, this flexibility lets you approach the police where you reside or where the loss occurred.
The police are obliged to register an FIR for a cognizable offence under Section 173 BNSS. If local police refuse to register the FIR, you may escalate in writing to the Superintendent of Police under Section 173(4) BNSS, and may approach the Magistrate under Section 175(3) BNSS to seek a direction for investigation.
Sections to invoke:
Template FIR (abbreviated):
To, The Station House Officer, Cyber Crime Police Station, [City/District], [State] – [PIN] Subject: FIR against unknown persons for cheating and cyber fraud under BNS 2023 Respected Sir/Madam, I, [Your Name], S/o or D/o [Parent Name], aged [Age] years, residing at [Full Address], Aadhaar [XXXX-XXXX-1234], Mobile [+91-XXXXXXXXXX], hereby lodge the following complaint: 1. On [Date], I was added to a Telegram group named "[Group Name]" by user @[Username]. 2. The admin, posing as a certified crypto trader, promised 40% monthly returns via an app "[App Name]" downloadable from [URL]. 3. I deposited ₹[Amount] to wallet address [0xABC...XYZ] on [Date] via UPI transaction [UTR number]. 4. Subsequently, I was unable to withdraw funds. The app displayed "System Maintenance." The Telegram group was deleted on [Date]. 5. This constitutes offences under Section 318(4) and Section 319 BNS 2023 and Section 66D IT Act 2000. 6. I request registration of FIR, freezing of the suspect wallet/account, and coordination with the Financial Intelligence Unit-India. Attachments: [List—screenshots, bank statement, blockchain explorer printout] Date: [DD/MM/YYYY] Signature: [Your Signature]
Citizen tip — Carry a USB drive with all evidence to the police station. Insist on an acknowledgment receipt with the FIR number. If the FIR is refused, send your written complaint to the Superintendent of Police citing Section 173(4) BNSS.
For step-by-step support, see Citizen Crisis Response Network.
Step 1: Register on National Cybercrime Reporting Portal
Visit https://cybercrime.gov.in → “Report Other Cyber Crime” → Select the relevant cyber-fraud category → Upload evidence → Submit. You will receive an acknowledgment number. Mention this number in your FIR; it helps inter-state coordination.
Step 2: Request a wallet/account freeze
If scam proceeds moved to a KYC-compliant Indian exchange or bank account, the investigating agency can act to freeze or attach the proceeds. Under the PMLA, proceeds of crime can be provisionally attached under Section 5 PMLA 2002. File an application to the Investigating Officer citing the wallet address and exchange/bank name.
Step 3: Blockchain tracing
Crypto transactions are pseudonymous, not anonymous. Professional blockchain forensic firms can trace fund flows, and several state police cyber cells have in-house capability. Request tracing in your FIR.
Step 4: PMLA complaint to FIU-India
Where a scheduled offence under the PMLA is attracted (including cross-border crypto frauds), you can share information with:
Financial Intelligence Unit-India 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi – 110021 Website: https://fiuindia.gov.in
Include transaction hashes, wallet addresses, and a timeline. FIU-India can coordinate with foreign Financial Intelligence Units under the Egmont Group framework.
Trust signal — Crypto fraud has risen sharply in recent years, and many state police forces now have dedicated cyber cells with blockchain analysts. A properly documented complaint with preserved evidence stands a far better chance of being acted upon.
To FIU-India (seeking STR information):
To, The Central Public Information Officer, Financial Intelligence Unit-India, 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi – 110021 Under Right to Information Act 2005 1. Whether any Suspicious Transaction Report (STR) or Cash Transaction Report (CTR) was filed by any reporting entity concerning wallet address [0xABC...XYZ] or associated Aadhaar/PAN [redacted for privacy] between [Date] and [Date]. 2. If yes, date of STR filing and name of reporting entity (exchange). 3. If no, the reasons recorded, if any, for no STR being filed. 4. Copy of any publicly disclosable guidelines for handling crypto-related STRs under PMLA. Application fee: ₹10 (IPO/DD/online) [Your Name, Address, Mobile, Email] Date: [DD/MM/YYYY]
To Income Tax Department (TDS verification):
To, The CPIO, Income Tax Department, Aayakar Bhavan, [City], [State] Under Right to Information Act 2005 1. Copy of Form 26QE (TDS challan-cum-statement) reflecting TDS deposited in my name (PAN: [XXXXXXXXXX]) by [Exchange Name] for FY 2026-27. 2. Total TDS deducted under Section 194S against my PAN as on [Date]. 3. If TDS was deducted but not reflected in Form 26AS, the reasons and rectification timeline. Application fee: ₹10 (IPO/DD/online) [Your Name, Address, Mobile, Email] Date: [DD/MM/YYYY]
Reply timeline: 30 days under Section 7(1) RTI Act 2005. For appeal, see RTI Act 2005 Complete Guide.
The legality of crypto trading in India was settled by the Supreme Court in Internet and Mobile Association of India v. RBI (2020 SCC OnLine SC 275), which set aside the RBI's 2018 banking restriction on virtual-currency businesses as disproportionate. Crypto assets are therefore lawful to hold and trade, though they are not legal tender and are taxed under Section 115BBH.
On the tax side, the constitutional validity of the 30% regime under Section 115BBH has not been struck down, and the statute as it stands permits only the cost of acquisition as a deduction, with no set-off or carry-forward of losses.
Cheating under BNS:
The BNS came into force on 1 July 2024 and largely re-enacts the cheating provisions of the IPC (Sections 415–420) as Sections 318–319. Pre-2024 case-law on cheating via cryptocurrency therefore remains instructive, and large “guaranteed-return” crypto Ponzi schemes can also attract the Prize Chits and Money Circulation Schemes (Banning) Act 1978.
Warning — Many scam victims settle for partial recovery offered by fraudsters in exchange for withdrawing the FIR. Cheating under Section 318(4) BNS is not in the list of compoundable offences under Section 359 BNSS, so it cannot lawfully be “settled” out of court. Accepting settlement money outside the legal process can expose you to further risk.
| Myth | Reality |
|---|---|
| Crypto is banned in India, so transactions are illegal and not taxable. | Crypto is legal but highly regulated. Section 115BBH explicitly taxes VDA income. A ban was discussed in 2021 but never enacted. |
| 1% TDS is the final tax; I don't need to pay 30%. | 1% TDS is only a withholding. You owe 30% on gains. Adjust the TDS credit in your ITR and pay the balance. |
| I can offset crypto losses against salary or business income. | No. Section 115BBH prohibits inter-head set-off. Crypto losses cannot be set off or carried forward. |
| If I trade on foreign exchanges (Binance, Coinbase), Indian tax doesn't apply. | Wrong. As a resident Indian, your worldwide income is taxable. Non-disclosure can invite penalty, prosecution under Section 276CC IT Act, and FEMA consequences. |
| Scammers cannot be traced because blockchain is anonymous. | Blockchain is pseudonymous. KYC-compliant on-ramps/off-ramps reveal identity, and agencies have traced crypto fraud proceeds in several cases. |
| Filing FIR is pointless; police don't understand crypto. | Many states now have trained cyber cells. Filing an FIR preserves your legal remedy and is the gateway to freezing and tracing. |
Legal Notice to Scam Platform (before or parallel to FIR):
LEGAL NOTICE UNDER SECTION 318(4) BNS 2023 To, [Platform Name / Admin Name if known] [Address if available, else "Address Unknown"] My Client: [Your Name], [Address] My client deposited ₹[Amount] on [Date] into your platform "[App Name]" via wallet address [0xABC]. Your platform falsely represented guaranteed returns and is unregistered with FIU-IND. NOTICE: 1. Refund ₹[Amount] + interest @ 12% p.a. within 15 days. 2. Provide GST invoice, PAN, and FIU-IND registration details. 3. Failing which, my client will initiate criminal proceedings under BNS 2023 and proceedings under the Consumer Protection Act 2019 and PMLA 2002. This notice is without prejudice to legal remedies. Advocate [Your Lawyer Name] Enrolment No. [Bar Council No.] Date: [DD/MM/YYYY]
Do this immediately — Send the legal notice via registered post + email and retain the acknowledgment. Even if the scammer does not respond, the notice is evidence of your bona fide effort at resolution and strengthens your case.
Yes. Cryptocurrency is not banned. The Supreme Court in Internet and Mobile Association of India v. RBI (2020 SCC OnLine SC 275) set aside the RBI's banking restriction. However, crypto assets are not legal tender; only the Indian Rupee is, per the RBI Act 1934. Trading and holding crypto is legal, subject to tax under Section 115BBH.
No. Section 115BBH does not permit any deduction except cost of acquisition. Scam losses cannot be set off against any income, nor carried forward.
Under Section 106 BNSS, police may seize property suspected to be connected with an offence. If your wallet or account is linked to a scam, police may direct the exchange/bank to freeze it. You can approach the Magistrate under Section 503 BNSS for release of property, proving the legitimate source of funds.
The position on GST on the crypto asset itself is not free from doubt. In practice, exchanges charge GST on their platform fees (brokerage). Always check the latest CBIC clarifications and your exchange's tax invoices.
You can still file an FIR in India where the offence or its consequence occurred (Sections 197 and 199 BNSS). For large cross-border cases, agencies can use Mutual Legal Assistance Treaties, and FIU-India can coordinate with foreign FIUs. Cross-border recovery typically takes many months.
You may, if the counterparty operated as a “trader” or “service provider” under the Consumer Protection Act 2019. The forum depends on the value of the claim: District Commission, State Commission, or National Commission. The general limitation period is 2 years from the cause of action.
There is no IRDAI-regulated crypto-specific insurance product that covers user fraud. Some exchanges advertise “insurance,” but the fine print usually covers only certain exchange-side incidents, not user scams. Prioritize security and due diligence rather than relying on insurance.
You don't. Section 115BBH taxes only realized gains on transfer. Merely holding crypto is not taxable. But swapping one crypto for another (e.g., BTC to ETH) is itself a taxable transfer.
A late-filing fee applies under Section 234F, along with interest under Section 234A. In cases of wilful failure to file returns where tax is due, prosecution can follow under Section 276CC of the Income-tax Act.
Yes. Anticipatory bail is available under Section 482 BNSS (which replaced Section 438 CrPC). The court weighs factors such as the nature of the accusation and whether custodial interrogation is necessary. Courts have repeatedly stressed that personal liberty is paramount and pre-arrest protection should be granted where no prima facie case is made out.
Most citizens miss this — Keep a year-wise sheet: Date, Transaction Type (Buy/Sell/Swap), Amount in INR, Wallet Address, TDS Deducted, Exchange Name. This is your audit trail and helps if your return is taken up for scrutiny.
Crypto taxation in India is among the harshest globally—30% flat rate, no loss relief, 1% TDS on transfers—yet scam enforcement remains uneven. Your primary defense is knowledge: understand Section 115BBH and Section 194S, recognize red flags early, preserve evidence meticulously, and use the statutory remedies under the BNS 2023, BNSS 2023, RTI Act 2005, and Consumer Protection Act 2019.
The Citizen Crisis Response Network exists because the system is complex and intimidating. Every template, RTI draft, and FIR clause in this guide is meant as a practical starting point you can adapt to your facts. You are not alone.
Essential resources:
Government portals:
Do not wait. The first 48 hours after a scam are critical. Evidence vanishes, wallets are emptied, servers go offline. Act now, preserve everything, and assert your rights.