New Delhi: The Delhi High Court Wednesday gave the Ministry of Finance six months to take steps on a Public Interest Litigation (PIL) seeking to address a grey area in India’s electoral disclosure framework on cryptocurrency holdings by politicians.
Under the Representation of the People Act, 1951 and the Conduct of Election Rules, 1961, disclosure of Virtual Digital Assets (VDA), or cryptocurrency holdings, is voluntary.
The plea, filed through advocates Suroor Mander, Gaurav Kumar, Siddharth Mishra, Kartik Rajpurohit, Gaurav Kumar, and Sehrish Jafri, argued that regulation is necessary as virtual assets are now becoming an important part of the economy.
The plea said the absence of mandatory disclosure of cryptocurrencies under the 1951 Act and the Conduct of Election Rules significantly affects voters’ fundamental right to information.
A bench of Chief Justice D.K. Upadhyay and Justice Tejas Karia directed the ministry to come up with recommendations or take any other decision, and inform the petitioners within six months.
“But how the government is going to do that still remains a big question to be answered,” Mander told ThePrint. “Sometime back, I connected with a young lawyer in Jabalpur, and we decided to tackle this issue. Although these Virtual Digital Assets are deemed as economic instruments undoubtedly, we wrote to the EC. But they did not respond to the representations about including disclosure about them under form 26 for declaration of assets by politicians.”
Pointing to a slew of cases like the Supreme Court’s 2002 and 2003 rulings in the Union of India vs. Association for Democratic Reforms and PUCL vs Union of India cases, Mander said the Election Commission was empowered to fill legislative gaps to ensure free and fair elections. “But this issue remains a grey area.”
Mander said that although these disclosures for politicians are voluntary today, there is still a need for guidelines to regulate this issue. She added that only a few people like Shashi Tharoor and Jayant Chaudhary had chosen to disclose such information voluntarily at the moment.
“If MPs or MLAs lie about non-disclosure of such digital assets, it should be seen as a violation of the Representation of the People Act. The ball is now in the Ministry of Finance’s court as they have to make a decision in six months.”
Section 2(47A) of the Income Tax Act, 1961 defines cryptocurrency, or Virtual Digital Assets, as any information, code, number or token that is not Indian or foreign currency. These digital assets have an inherent value, which can be used in any financial transactions or investments, and can be transferred, stored or traded electronically.
The amended IT Act also says that Virtual Digital Assets must be taxed at 30 percent.
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What the plea says
The case stems from the PIL filed by advocate Deepanshu Sahu to bring greater transparency, probity and integrity in the electoral process.
The plea argued that by not mandating the disclosure of cryptocurrencies under the 1951 Act and the Conduct of Election Rules, the voters’ fundamental right to information and the “purity of elections” will be significantly affected.
Under the current legal framework, Section 75A of the 1951 Act mandates election candidates to disclose their movable and immovable assets and liabilities. But it does not include a dedicated disclosure mechanism for digital assets like cryptocurrencies. The plea argued that even the 1961 Rules do not include any such requirement.
This omission is critical given the rapid growth of cryptocurrency in India and its formal recognition as property and capital assets under multiple laws, the plea argued.
Cryptocurrencies are no longer “speculative” or extra-legal instruments, the plea said, while referring to the IT Act, which recognises them under Section 2(47A). “The income arising from their transfer is taxed at a flat rate of 30 percent,” the plea says, adding that non-disclosure of such instruments attracts penal consequences.
The petitioners said these Virtual Digital Assets have also been brought under the Prevention of Money Laundering Act, 2002, to acknowledge the risks of money laundering, anonymous transactions and illicit financial flows.
Despite such statutory recognition, the electoral laws are conspicuously silent on cryptocurrency, the plea says.
The crux of the problem
The plea pointed out that due to the absence of a specific column or definition of Virtual Digital Assets in Form 26, candidates can conceal their substantial digital wealth under the vague category of “any other assets.”,
Given the decentralised and cross-border nature of cryptocurrencies, this gap creates a structural loophole that can be exploited for undisclosed political funding, electoral malpractices and concealment of wealth, the plea adds.
The non-disclosure of cryptocurrencies also violates voters’ fundamental right to information under Article 19(1)(a), a principle that has been upheld by the top court in a slew of rulings, including one on an electoral bonds case in 2024.
The existing framework is “arbitrary” and unconstitutional and violates the candidates’ right to equality by holding those with traditional assets like shares, bank deposits and property, to a more stringent standard of disclosure obligations while allowing those with greater wealth in cryptocurrencies to escape comparable scrutiny, it adds.
Emphasising that cryptocurrencies fall within the legal meaning of property, as held by the Supreme Court in the Jilubhai Nanbhai Khachar vs. State of Gujarat case, the plea said that once acknowledged as property, its exclusion from mandatory electoral disclosures becomes legally indefensible.
For these reasons, the plea sought relief such as a declaration that these VDAs fall under the scope of movable assets under Section 75A of the 1951 Act. It also sought to amend Form 26 to include a dedicated disclosure mechanism for cryptocurrency holdings.
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The flip side
Cryptocurrencies and digital tokens are legally permitted to be owned and traded in India, but they operate within a distinct regulatory and tax framework, Sathvik Vishwanath, co-founder and CEO of Unocoin, told ThePrint.
“Rather than being treated as currency, these assets are officially classified as Virtual Digital Assets (VDAs) under the Income Tax Act. This classification places them in the category of taxable property.”
Income from the transfer of VDAs is taxed at a flat rate of 30 percent, regardless of the investor’s income slab, with a 1 percent Tax Deducted at Source (TDS) applicable to most transactions.
Vishwanath said these provisions were introduced to ensure transparency and bring digital asset activity, while adding that losses from VDA transactions cannot be offset against other income, making tax planning especially important for traders and investors.
Although the Reserve Bank of India (RBI) does not recognise cryptocurrency as legal tender, Indian courts have acknowledged that crypto assets can be treated as property, the Unocoin CEO told ThePrint.
Vishwanath added that the legal environment surrounding crypto use continues to evolve through taxation policies and judicial interpretation.
Delhi-based lawyer Arpit Goel told ThePrint that cryptocurrencies and other virtual digital assets are increasingly “classic and sophisticated instruments for laundering proceeds of crime”.
“Recognising this, the government, by its January 2025 notification, has brought virtual digital asset service providers within the reporting framework of the PMLA,” Goel said.
“If the objective of the law is to curb illicit flows and terror financing, political disclosures must include digital assets, and enforcement agencies must invest greater institutional capacity in tracking crypto transactions rather than focusing disproportionately on cash and other properties which have no element of laundering.”
(Edited by Sugita Katyal)