India is now one of the world’s largest cryptocurrency markets, with millions trading digital assets despite regulatory uncertainty.
As of 2025, cryptocurrency isn’t illegal, but it exists in a gray area without full legal recognition, raising concerns over compliance and taxation.
In this article, readers will learn about the current legal status of cryptocurrency in India, understand the government and RBI’s regulatory stance on crypto, and also discover taxation rules and compliance requirements.
You will also learn about safety considerations for crypto investment and gain insights into the future digital asset trading in the country.
Is Cryptocurrency Legal in India: Key Takeaways
- Cryptocurrency is not illegal in India, but lacks full regulation and is not accepted as legal tender.
- The RBI does not recognize crypto as legal tender and restricts its use in everyday transactions.
- Crypto trading is permitted through registered exchanges that operate following current compliance rules.
- The government’s stance remains cautious as it develops frameworks for an official digital currency (CBDC) alongside regulations for private cryptocurrencies.
Tax Laws Apply to Crypto Gains
India imposes a comprehensive taxation framework on cryptocurrency transactions, with a flat 30% tax rate and a 1% tax deducted at source (TDS) on transactions exceeding ₹50,000.
This taxation applies uniformly regardless of holding period, eliminating distinctions between short-term and long-term gains.
Is Cryptocurrency Legal in India in 2025?
Cryptocurrencies are currently unregulated in India and are not recognized as legal tender; however, trading and investing in crypto is legal.
While crypto may not be real money, but government and RBI have maintained a cautious stance, emphasizing that while digital assets are not banned, they cannot replace traditional currency for daily transactions.
The Indian Parliament planned to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the Winter Session, but it was delayed pending Cabinet approval.
Although this legislation remains under discussion without final enactment, it leaves the regulatory framework in a state of continuing development.
Government and RBI Regulations on Cryptocurrency
The Reserve Bank of India initially imposed a ban on banking transactions related to cryptocurrencies in 2018, which was lifted by the Supreme Court in March 2020.
Following this landmark judgment, the RBI has issued guidelines requiring cryptocurrency businesses to comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols.
Section 115BBH imposes a flat 30% tax on profits from Virtual Digital Assets, while Section 194S levies a 1% Tax Deducted at Source on transactions exceeding ₹50,000.
The RBI launched the Digital Rupee (e₹-W and e₹-R) in 2022 as India’s official, government-backed alternative to private cryptocurrencies.
Cryptocurrency Taxation Rules in India
India imposes a flat 30% tax on profits from trading, selling, or spending cryptocurrency, plus a 4% health and education cess.
This taxation applies uniformly regardless of holding period, eliminating distinctions between short-term and long-term gains.
A 1% TDS is applicable on sale transactions exceeding Rs. 50,000 annually, starting July 1, 2022.
Importantly, no deductions are permitted except the cost of acquisition, and losses from cryptocurrency cannot be offset against other income sources.
How To Report Gains/Losses in Cryptocurrency?
Crypto gains must be reported under Schedule Virtual Digital Assets (VDA) in Income Tax Returns for FY 2023-24.
Investors should use ITR forms 1–4, depending on their income sources, and keep detailed records of all crypto transactions.
They must also comply with TDS requirements, either through registered exchanges or by manually filing for trades on international platforms.
Is It Safe to Invest in Crypto in India?
From a legal perspective, cryptocurrency investment in India operates within a framework of permitted but unregulated activity.
The lack of regulation surrounding cryptocurrency in India presents numerous potential risks to investors and the broader economy. The risk includes limited dispute resolution mechanisms and the absence of investor protection schemes.
Unlike regulated markets such as the US or UK, where comprehensive frameworks govern digital assets, India’s approach remains cautious and evolving.
As no criminal cases have been filed against crypto investors or traders, this suggests that the Indian government tacitly accepts crypto income as legitimate.
However, this implicit acceptance doesn’t eliminate regulatory uncertainties.
Future of Crypto Legality in India
Industry leaders and policymakers anticipate that the Cryptocurrency and Regulation of Official Digital Currency Bill will be introduced in the future, possibly in late 2025.
The government has indicated a balanced approach, focusing on regulating rather than banning private cryptocurrencies.
India’s stance at global crypto forums, such as the G20, emphasizes international cooperation for comprehensive regulatory frameworks.
It suggests alignment with global standards rather than isolated policy development.
The successful implementation of India’s CBDC pilot programs may influence future regulations for private digital assets. The future for crypto looks strong in India. Check out this list and find which crypto will boom in 2025.
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Conclusion: Crypto isn’t illegal in India, But It requires Careful Tax and Regulatory Navigation
Cryptocurrency’s legal status in India remains in a carefully maintained gray area, where digital assets are neither officially banned nor fully regulated.
The government has not granted cryptocurrencies legal tender status, yet it allows trading through registered exchanges, creating a complex and evolving environment.
The introduction of a formal taxation structure, including a 30% flat tax on gains and 1% TDS on specific transactions, reflects a de facto recognition.
While this signals acceptance, it also reinforces regulatory oversight and control over digital financial activity.
Investors must proceed with caution, ensure strict tax compliance, and monitor policy changes as India navigates this space.
FAQs
Yes, you can convert cryptocurrency to cash by selling it on a registered exchange, such as CoinDCX, WazirX, or CoinSwitch.
You can legally trade crypto in India using FIU-registered exchanges like CoinDCX, CoinSwitch, and WazirX.
Both custodial wallets (e.g., CoinDCX, WazirX) and non-custodial wallets (e.g., MetaMask, BitKey) are legal in India, provided they comply with regulatory norms.
Yes, Bitcoin is legal in India. While it’s not legal tender, it’s legal to buy, sell, or hold it following the Supreme Court’s 2020 ruling lifting the RBI banking ban.
