Crypto Regulation in India
Everything about cryptocurrency law, taxation, and regulation in India — sourced from official government publications only.
Crypto is legal in India — you can buy, sell, and hold it — but profits are taxed at a flat 30% with no deductions, and a 1% TDS is deducted at source on most transactions.
Is crypto legal in India?
Yes. Cryptocurrency is legal in India. The Supreme Court of India confirmed this in March 2020 when it struck down the Reserve Bank of India's 2018 circular that had banned banks from servicing crypto businesses. Since then, crypto has operated legally, and the government formalised its approach through the Finance Act 2022.
The government classified cryptocurrencies as "Virtual Digital Assets" (VDAs) — a new asset category under Indian tax law. This classification does not make crypto a currency or legal tender, but it makes it a recognised asset class for tax purposes.
India ranks first in the world for crypto adoption according to Chainalysis's Global Crypto Adoption Index (2023). More Indians use cryptocurrency than citizens of any other country.
The 30% tax — what it means
When you sell, trade, or transfer a VDA at a profit, that profit is taxed at a flat 30% rate — regardless of how long you held it. There is no lower rate for long-term holdings. There is no basic exemption. You pay 30% on every rupee of gain.
You cannot deduct losses from one VDA against gains from another. If you make ₹10,000 profit on Bitcoin but ₹5,000 loss on Ethereum in the same year, you pay 30% on the full ₹10,000 — you cannot use the Ethereum loss to reduce your Bitcoin gain. The only deduction allowed is the original cost of acquisition.
Crypto received as gifts, airdrops, or mining rewards is taxed as income at your regular income tax slab rate in the year of receipt — not the 30% VDA rate.
The 1% TDS — what happens automatically
A 1% Tax Deducted at Source (TDS) applies to VDA transfers above ₹50,000 in a financial year (₹10,000 for certain specified persons). This means when you sell crypto on an Indian exchange, the exchange deducts 1% of the transaction value and pays it to the government on your behalf. This is credited to your PAN and can be offset against your final tax liability when you file your ITR.
The TDS applies to the full transfer value, not the profit. If you sell ₹1,00,000 of Bitcoin, ₹1,000 is deducted regardless of whether you made a profit or a loss.
Which exchanges can you use in India?
You can legally use exchanges registered with the Financial Intelligence Unit-India (FIU-IND) under the Prevention of Money Laundering Act (PMLA). As of 2026, major registered Indian exchanges include CoinDCX, CoinSwitch Kuber, Zebpay, and WazirX. Binance and some international exchanges have faced regulatory challenges in India — check current registration status before using any exchange. See the India exchanges page for the current list.
What about the RBI's position?
The RBI has consistently expressed concerns about cryptocurrency's impact on financial stability and monetary policy. However, it cannot ban crypto outright after the Supreme Court's 2020 ruling. The RBI's position is that crypto is highly risky and should not be treated as a currency — but it does not prohibit citizens from holding or trading it as an asset.
The RBI is simultaneously developing the Digital Rupee — India's Central Bank Digital Currency (CBDC). The e₹ is distinct from private cryptocurrencies: it is issued by the RBI, its value is guaranteed by the government, and it is not volatile.
The VDA definition — what qualifies
Section 2(47A) of the Income Tax Act (inserted by Finance Act 2022) defines Virtual Digital Assets as: any information, code, number, or token (not Indian or foreign currency) generated through cryptographic means or otherwise, which provides a digital representation of value exchanged with or without consideration, with a promise or representation of having inherent value, or functions as a store of value or unit of account, and includes non-fungible tokens (NFTs) and any other similar token.
The definition explicitly includes NFTs. It excludes gift cards and loyalty points. The Central Government has power to notify any other digital asset as a VDA, or to exclude any digital asset from the definition. This gives the government flexibility to expand or contract the scope through notification rather than requiring full Parliamentary amendment.
Source: Finance Act 2022, Section 2(47A). Income Tax Act, 1961. incometaxindia.gov.in
Tax framework — complete picture
Section 115BBH — the 30% VDA tax
Section 115BBH of the Income Tax Act taxes income from transfer of VDAs at 30% (plus applicable surcharge and cess, bringing the effective rate to approximately 31.2% for most taxpayers, or up to 42.7% for the highest surcharge bracket). Key provisions:
- No deduction for any expenditure or allowance except cost of acquisition
- No set-off of loss from transfer of one VDA against income from another VDA
- No carry-forward of VDA losses to subsequent years
- Applies to transfer, sale, swap, or any form of disposal
- The rate applies regardless of holding period — no distinction between short-term and long-term
Section 194S — the 1% TDS
Section 194S requires any person responsible for paying consideration for transfer of a VDA to deduct 1% TDS. Threshold: ₹50,000 per financial year per buyer (₹10,000 for cases where the buyer is a specified person — companies, partnership firms, etc.). The deductee can claim this as credit against their final income tax liability. Exchanges registered with FIU-IND handle TDS compliance on behalf of users.
Source: Finance Act 2022. Sections 115BBH and 194S, Income Tax Act 1961. CBDT Circular No. 13/2022 — FAQ on VDA taxation.
PMLA applicability — KYC and compliance
In March 2023, the Ministry of Finance brought crypto exchanges under the Prevention of Money Laundering Act (PMLA) 2002. This means Virtual Asset Service Providers (VASPs) operating in India must: register with FIU-IND, conduct Customer Due Diligence (CDD) and KYC on users, maintain transaction records for 5 years, report suspicious transactions, comply with the FATF Travel Rule for transfers above specified thresholds.
International exchanges serving Indian users without FIU-IND registration may not be operating in compliance with Indian law. In December 2023, FIU-IND issued show-cause notices to several international exchanges for non-compliance. Some subsequently registered; others restricted Indian users.
Source: Ministry of Finance Notification, 7 March 2023. FIU-IND guidelines. fiuindia.gov.in
SEBI's role — securities classification
The Securities and Exchange Board of India (SEBI) submitted a report to the government in 2023 recommending that crypto assets that function as securities should be regulated under SEBI's framework. As of April 2026, no cryptocurrency has been formally classified as a security in India. SEBI has been authorised to regulate crypto exchanges but has not yet implemented a full licensing regime. The regulatory framework for crypto exchanges in India is still being finalised through the inter-ministerial Crypto Assets Regulation Committee.
India's regulatory framework is described as "tax-heavy but legally clear." The 30% flat tax with no loss set-off is considered punitive by industry, discouraging active trading. It has been a factor in some trading volume shifting to overseas platforms. The TDS mechanism ensures the government tracks transactions, even when tax might not be immediately owed. The PMLA compliance requirement is seen as bringing India into FATF alignment — important for international financial relationships.
The regulatory timeline
Constitutional and legal basis
Cryptocurrency regulation in India operates under Entry 97 of the Union List (Seventh Schedule) — the residuary entry covering matters not listed elsewhere — combined with the central government's power to regulate currency and financial instruments. The Supreme Court in Internet and Mobile Association of India vs RBI (2020) held that the RBI's 2018 circular was disproportionate and violated Article 19(1)(g) (right to practise any profession, trade, or business) without adequate justification. The Court did not rule that crypto cannot be regulated — it ruled that the specific restriction imposed was disproportionate.
This legal position leaves the door open for future restrictions if accompanied by adequate justification and proportionate means. The government's current approach — taxation and PMLA compliance — represents a proportionate regulatory response that is legally more defensible than an outright ban.
Source: Internet and Mobile Association of India vs Reserve Bank of India, (2020) 10 SCC 274. Supreme Court of India.
The VDA tax framework — technical interpretation
The Section 115BBH regime creates a separate head of income for VDAs. "Transfer" is defined broadly to include sale, exchange, relinquishment, extinguishment of right, or compulsory acquisition — meaning crypto-to-crypto swaps are taxable events, not just fiat conversions. The Central Board of Direct Taxes (CBDT) Circular No. 13/2022 clarified several points: mining income is taxed as business income, not under Section 115BBH; staking rewards are treated as income in the year of receipt; NFT sales are covered under the VDA definition.
The no-set-off provision has created complexity for portfolio traders. Under standard tax principles, capital losses can be set off against capital gains. The Finance Act 2022 explicitly overrides this for VDAs — each VDA is taxed in isolation. This has been challenged by industry bodies as economically irrational, but remains the law as of April 2026.
PMLA technical requirements for VASPs
The March 2023 Ministry of Finance Notification defined "Virtual Asset Service Provider" under PMLA to include: exchange between VDAs and fiat currencies, exchange between one or more forms of VDAs, transfer of VDAs, safekeeping or administration of VDAs or instruments enabling control over VDAs, and participation in and provision of financial services related to an issuer's offer or sale of a VDA. This definition covers exchanges, custodians, OTC desks, and token issuance platforms.
VASPs must conduct Enhanced Due Diligence (EDD) for politically exposed persons and high-risk customers. The Travel Rule — requiring transmission of originator and beneficiary information for VDA transfers — aligns India with FATF Recommendation 15 and mirrors similar requirements in the EU (TFR), USA, and Singapore. India's Travel Rule threshold under the current framework requires VASPs to collect and transmit identifying information for transfers above ₹50,000.
Sources: Ministry of Finance Gazette Notification, 7 March 2023 (No. GSR 197(E)). PMLA 2002, Section 2(1)(sa) as amended. FATF Guidance on Virtual Assets and Virtual Asset Service Providers (Updated 2021). fatf-gafi.org
The e-Rupee (Digital Rupee) — CBDC framework
The Reserve Bank of India Act 1934 was amended by the Finance Act 2022 to include "bank notes in the form of digital" — providing legal basis for the Digital Rupee (e₹). The RBI issued a Concept Note on Central Bank Digital Currency in October 2022. Two forms were launched: e₹-W (wholesale) for interbank settlement in November 2022, and e₹-R (retail) for public use in December 2022.
The e₹ is a direct liability of the RBI, unlike bank deposits which are liabilities of commercial banks. It is legal tender, denominated in rupees, with 1 e₹ = 1 ₹. The retail pilot uses a token-based model with distribution through commercial banks. As of April 2026, the e₹ pilot is operational but volume remains modest — the RBI has focused on use cases in government securities settlement, cross-border payments, and programmable money for welfare disbursements.
Sources: Reserve Bank of India, Concept Note on CBDC, October 2022. Finance Act 2022 amendment to RBI Act 1934. RBI Annual Report 2024–25. rbi.org.in
India's international regulatory engagement
During India's G20 presidency (2023), the government played a significant role in shaping the IMF-FSB Synthesis Paper on crypto assets, which was adopted as the G20's recommended global policy framework. India's position supports comprehensive regulation over blanket bans, with an emphasis on macroeconomic risk assessment, cross-border information sharing, and FATF Travel Rule implementation. India's advocacy for emerging market perspectives in global crypto regulation — particularly on capital flow management tools — has been notable.
Sources: IMF-FSB Synthesis Paper: Policies for Crypto-Assets, 7 September 2023. G20 New Delhi Leaders' Declaration, 9-10 September 2023.