Crypto Rules and Regulations in India — What You Need to Know in 2025
India’s relationship with cryptocurrency has been a rollercoaster ride over the last few years.
From banking bans and Supreme Court battles to heavy taxation and regulatory crackdowns, the industry has seen constant twists and turns.
As we step into 2025, crypto in India is not banned, but it is highly regulated.
Here’s the latest snapshot of how the law treats digital assets today.
🚫 Crypto is Not Legal Tender (But Not Illegal Either)
The government has made it clear that Bitcoin, Ethereum, or any other private cryptocurrency is not legal tender in India.
You can hold, trade, or transfer crypto, but you can’t use it to pay for everyday goods and services like the rupee.
The Reserve Bank of India (RBI) remains openly sceptical, citing risks to financial stability.
Instead, it’s pushing its own Digital Rupee (CBDC), which is gradually rolling out across banks and retailers.
💰 Tax Rules for Crypto (Virtual Digital Assets)
Since the Finance Act 2022, crypto has fallen under the category of Virtual Digital Assets (VDAs), and the tax regime is tough:
- 30% flat tax on profits from crypto trades (Section 115BBH of the Income Tax Act).
- 1% TDS (Tax Deducted at Source) on every transfer above a certain threshold.
- No deductions allowed (except cost of acquisition).
- Losses cannot be set off against other income.
👉 In simple terms: if you make ₹1 lakh profit trading Bitcoin, ₹30,000 goes to taxes. If you lose money, you can’t offset it against stock market or salary income.
🛡️ AML and Compliance Rules – FIU Registration is Mandatory
Exchanges, custodians, and even offshore platforms serving Indian users are now treated as reporting entities under the Prevention of Money Laundering Act (PMLA).
This means:
- Platforms must register with the Financial Intelligence Unit (FIU-IND).
- Strict KYC (Know Your Customer) checks are mandatory.
- Suspicious transactions must be reported to authorities.
- Non-compliant platforms risk monetary penalties, show-cause notices, and even website blocking (several offshore exchanges faced this in 2024).
📊 RBI’s Push for the Digital Rupee (CBDC)
While crypto faces restrictions, the RBI is going full throttle with the Digital Rupee (e₹).
- Pilot projects began in 2022.
- By 2025, the CBDC is being tested with more banks, retailers, and even programmable features.
- The goal is clear: offer a regulated digital alternative while keeping private cryptocurrencies under tight watch.
⚖️ The Regulatory Landscape – Who Governs What?
Crypto in India doesn’t have a single regulator yet. Instead, it’s a patchwork of authorities:
- Ministry of Finance – Policy direction and taxation.
- RBI – Financial stability, payment systems, CBDC.
- FIU-IND – AML/KYC compliance for exchanges.
- SEBI – Exploring oversight of tokenized securities and investment products.
So far, the government prefers an incremental, cautious approach instead of sweeping legislation.
🚀 What This Means for You
- For investors & traders: Be prepared for high taxes and TDS deductions. Keep meticulous records for filing returns.
- For exchanges & startups: FIU registration and AML compliance are non-negotiable. Expect audits and reporting duties.
- For businesses: If you’re eyeing crypto payments, know that regulators prefer the Digital Rupee as the future of digital money.
📌 Key Takeaway
India isn’t banning crypto, but it isn’t embracing it either. The message is clear:
- Speculate if you want – but pay your taxes.
- Build crypto businesses – but register and comply.
- Use digital currency – but preferably the RBI’s e₹.
The coming years will likely bring more clarity.
But for now, the crypto sector in India is shaped by strict taxation, mandatory compliance, and a government that wants to control the digital financial future on its own terms.
What is Cryptocurrency/Crypto?
Cryptocurrency / crypto
Cryptocurrency is a kind of digital money.
- Unlike normal money (like dollars or euros), it only exists online, not as coins or paper.
- It’s built on a technology called blockchain, which works like a public digital notebook that keeps track of who owns what.
- It doesn’t rely on banks or governments to move or store money — people can send it directly to each other.
- Popular examples are Bitcoin and Ethereum.
Think of it as internet money that’s secured by math and computer networks instead of banks.
How people are using cryptocurrency in everyday life?
- Buying stuff online – Some websites and apps accept crypto (like Bitcoin) as payment, just like using PayPal or a credit card.
- Sending money to others – You can send crypto to someone in another country quickly, often with lower fees than a bank transfer.
- Investing – Many people buy crypto and hold it, hoping the price goes up (like buying stocks).
- Trading – Some people trade crypto daily, trying to profit from price changes.
- Games and apps – Certain games, apps, or platforms use crypto for rewards, items, or memberships.
- Digital art & collectibles (NFTs) – Crypto is also used to buy and sell unique digital items (like artwork or music).
⚠️ But: Crypto can be very risky. Prices go up and down fast, and not every business accepts it yet.
What is Virtual Digital Asset (VDA)?
A Virtual Digital Asset (VDA) is basically any kind of digital thing you can own or trade online, that has some value.
In plain words:
- It’s not physical (you can’t touch it), it only exists digitally.
- Examples include cryptocurrencies (like Bitcoin, Ethereum) and NFTs (digital art, music, game items, etc.).
- People can buy, sell, or trade these assets on the internet.
So, a VDA = digital property with value, kind of like how you own money or art in the real world, but this one lives online.
Difference between cryptocurrency and other VDAs (like NFTs)?
1. Cryptocurrency (like Bitcoin, Ethereum)
- Works like digital money.
- You can buy, sell, or use it for payments.
- Its main purpose is to act like currency or an investment.
2. Other VDAs (like NFTs, tokens in games, digital art, music rights, etc.)
- These are digital collectibles or assets.
- Example: an NFT of a painting is like owning the digital “certificate” of that artwork.
- They aren’t mainly for payments — instead, they’re for ownership, uniqueness, or rights.
👉 So the difference is:
- Cryptocurrency = digital money 💰
- Other VDAs (like NFTs) = digital things you own or collect 🎨🎮🎶
Here’s a real-life style example 👇
Imagine you’re in a game 🎮
- You buy some Bitcoin → This is cryptocurrency, like having money in your digital wallet. You can spend it, send it, or hold it.
- In the same game, you win a rare digital sword (NFT) → This is also a Virtual Digital Asset (VDA), but it’s not money. Instead, it’s a unique digital item you own. You could sell it to another player for crypto or real money.
💡 So:
- Bitcoin (crypto) = your digital money.
- NFT sword (other VDA) = your digital collectible/asset.
Both are VDAs, but one is currency and the other is a digital thing you own.
👍 Let’s use India as an example, since the term VDA is often used there in laws and taxes.
How governments (like in India) treat VDAs and why they make that distinction?
Why the government says “VDA” instead of just “cryptocurrency”
- Not everything digital with value is a cryptocurrency (like NFTs, tokens, etc.).
- So the government made a bigger category called Virtual Digital Assets (VDA).
- This way, rules cover Bitcoin, Ethereum, NFTs, and other similar digital assets under one umbrella.
How India treats VDAs
- Tax 💸
- If you sell a VDA (crypto, NFT, etc.) and make a profit, you pay 30% tax on that profit (no deductions allowed, except cost of buying).
- Also, if someone pays you in crypto/NFTs, you’re taxed on that income.
- TDS (Tax Deducted at Source) 🧾
- When you sell VDAs, 1% TDS is usually deducted on the transaction.
- Legal status ⚖️
- India hasn’t declared crypto “illegal,” but it’s also not legal tender (meaning you can’t use it like rupees to pay for goods everywhere).
- It’s allowed as an asset you can hold/trade, but under strict tax rules.
👉 So in short:
- Crypto & NFTs = VDAs in India.
- You can own and trade them, but you pay high taxes and can’t use them like normal money.
Budget 2025 — The concrete changes that affect crypto users (what the Finance Bill did)
The Finance Bill (Budget 2025) included several crypto-specific items. These are the headlines you need:
Reporting obligation (new Section 285BAA)
The Finance Bill inserts a new section (285BAA).
It requires prescribed reporting entities (i.e., exchanges, platforms or other “reporting entities” that the government will specify) to furnish detailed statements of crypto-asset transactions to the income-tax authority.
This requirement is effective from 1 April 2026 (the Bill sets dates for different clauses).
The rules will spell out who must register and what must be reported.
The Bill also lists penalties for non-compliance.
Wider definition of VDA / crypto-asset
The Bill amends the Income-tax Act’s definitions.
This act make the legal definition of a “virtual digital asset” broader and explicitly includes any “crypto-asset” described as “a digital representation of value“.
It relies on a cryptographically secured distributed ledger or similar technology.”
This expanded definition will apply from 1 April 2026 (for certain parts).
Virtual digital asset included in “undisclosed income”
Budget 2025 amended the definition of undisclosed income to insert “virtual digital asset” in the relevant section.
It have been in effect from 1 February 2025.
This means VDAs are specifically treated as possible sources of undisclosed (black) income under tax search/seizure rules.
TDS (Section 194S) remains a key tool
The law continues to require 1% TDS on payments for transfer of VDAs under the Income-tax Act (194S).
The Bill keeps this mechanism (and the finer threshold rules are provided through tax notifications).
Practically, this is how the tax authority enforces traceability.
No change to the flat VDA tax rate in Budget 2025
The special tax for VDA income, Section 115BBH, still taxes gains from VDAs at a flat 30% (with applicable surcharge and cess).
And it disallows most deductions and loss set-offs.
Budget 2025 did not repeal or reduce that rate.
It added reporting and compliance measures instead.
In Short: Budget 2025 tightened reporting and widened definitions. It did not liberalize taxes or make crypto legal tender. Expect exchanges and big platforms to be required to register and send transaction reports to income-tax authorities by rules that come into force.
Tax in plain language — exact numbers and how they work for you
Tax is often the thing that surprises people. These are the exact rules that Indian taxpayers must follow in 2025:
Flat 30% tax on income from VDAs (Section 115BBH)
Any profit/gain from transfer of a VDA is taxed at 30% (plus surcharge and 4% health & education cess where applicable).
The law is a flat rate. Your normal income slab does not matter for VDA gains.
The provision narrowly allows only cost of acquisition as a deduction. Further, routine expenses, fees or losses from other sources generally cannot be set off.
1% TDS on transfers (Section 194S)
When someone pays consideration for a VDA transfer, the payer must deduct 1% of the payment as TDS at the time of payment or credit.
Thresholds / Exemption Limits for Applying TDS under Section 194S
These are the “threshold rules” — i.e. when TDS becomes applicable vs when it is exempt.
TDS is not required to be deducted on amounts credited / paid before 1 July 2022 (i.e. the section is not in force then).
Specified Person vs Other Person distinction matters for the threshold.
If the payer is a specified person, then TDS need not be deducted if the aggregate consideration in the financial year does not exceed ₹50,000.
For other persons (i.e. not “specified persons”), TDS need not be deducted if the aggregate consideration is ≤ ₹10,000 in that year.
The threshold is applied per payer in a financial year — i.e. the sum of considerations paid by that payer to residents for VDA transfers in the year.
For FY 2022–23, even the consideration from 1 April 2022 to 30 June 2022 (i.e. before 1 July 2022) is included for computing whether thresholds (₹50,000 / ₹10,000) are crossed.
Some items are excluded from the definition of VDA (i.e. they won’t be taxed under this regime), e.g. gift cards, loyalty points, mileage points, subscription-based digital assets, etc.
Also, NFTs whose transfer involves transfer of an underlying tangible property (and where legal ownership of that tangible property passes) may be excluded.
No offset of losses / no long-term capital gains benefit
Losses from VDAs cannot be set off against other income and there are strict limits on carrying forward losses.
Also, holding period does not give you a lower rate; the 30% rate applies irrespective of how long you held the asset.
GST and service charges
Exchanges charge fees and these may attract GST. The exact GST treatment depends on the service; consult a tax professional for precise GST treatment for your business model.
For example: If you buy a crypto for ₹50,000 and later sell for ₹80,000. Your taxable income from that sale is ₹30,000 and tax is roughly ₹9,360 (30% of ₹30,000 plus cess and any surcharge).
Additionally, a 1% TDS (₹800 on ₹80,000) may have been deducted at sale, which you can claim while filing your return.
Reporting, data and who has to tell the taxman
Budget 2025 created or strengthened rules that require platforms and certain “reporting entities” to keep records and file transaction statements:
Section 285BAA (new)
Section 285BAA prescribed reporting entities must file statements about crypto transactions (who, when, how much) to the income-tax authority.
The government will set rules on format and timelines.
This starts from 1 April 2026 for the inserted section, although some related amendments are effective earlier.
The idea: exchanges and other VASP-like entities will have to proactively share transaction data.
FIU-IND registration and AML
The Financial Intelligence Unit (FIU-IND) has been active.
It is operating in India are expected to follow anti-money-laundering rules, file suspicious transaction reports and register/coordinate with FIU where required.
The FIU website and actions show it’s actively enforcing AML compliance.
Enforcement actions
Regulators have fined or directed non-compliant exchanges (for example, large penalties and show-cause actions have been public).
These indicate the government is serious about FIU/PMLA compliance.
Practical consequence
Even if you hold crypto in a foreign wallet, exchanges that interact with you may now be required to share transaction data with Indian authorities.
Keep complete records (dates, amounts, source/destination wallets, invoices).
Who regulates what in India? (RBI, Finance Ministry, SEBI, FIU and courts)
India does not have a single unified “crypto regulator.” Different agencies play different roles:
Ministry of Finance / CBDT
It handles taxation rules and Finance Bill items (this is where Section 115BBH, 194S and 285BAA come from).
FIU-IND & PMLA
Anti-money-laundering supervision, suspicious transaction reporting and registration steps for VASPs (exchanges). FIU has been active with orders and penalties.
Reserve Bank of India (RBI)
RBI is Bharat’s Monetary authority. It does not recognize private crypto as legal tender.
It has expressed concerns about systemic risks and has historically warned users and banks about dealing with virtual currencies.
The RBI’s public stance remains cautious.
(Recall the RBI banking ban of 2018 was struck down by the Supreme Court in 2020; that judgment is part of the legal background.)
SEBI
SEBI is a Securities market regulator.
It may regulate tokens that are securities (tokenized securities, certain ICOs).
But India has not handed SEBI blanket jurisdiction over all crypto.
Expect SEBI to step in if tokens behave like securities. (SEBI’s role varies by token type.)
Courts / Legal system
The Supreme Court’s 2020 IAMAI v. RBI judgement removed the RBI’s blanket banking restriction.
Courts remain an avenue for legal clarity where statutes are silent.
Practical compliance: exchanges, KYC, and how enforcement works
If you run or use an exchange or platform in India, these are the immediate operational steps you must take:
Register / cooperate with FIU and follow PMLA directions
FIU has ordered and fined platforms in the past for non-compliance. It is registering and following AML/KYC is essential.
Collect robust KYC data
Keep verified identity, PAN, address and source-of-fund records. Regulators expect strong due diligence.
Prepare to report transaction data to income-tax authorities under 285BAA
Build systems that can export required fields (who transacted, which token, amounts, wallets, timestamps).
Implement TDS collection logic (1% on transfers) and PAN verification
If PAN is missing the payer may face higher tax withholding. Exchanges must help users with documentation flows.
Keep separate audit trails for corporate and user funds
Segregation helps during investigations.
Expect spot checks and inquiries; respond quickly
The government has used show-cause notices and fines to compel compliance.
If you are a user/trader, keep every invoice, exchange statement and on-chain proof (tx hashes). You will need them for returns and to respond to notices.
Cross-border, FEMA and foreign wallets
Holding funds on foreign wallets or exchanges can raise additional rules:
Report foreign holdings
Tax forms and ITR schedules require disclosure of foreign assets (including crypto) and overseas accounts. Non-disclosure can trigger severe penalties or FEMA scrutiny.
FEMA (foreign exchange rules)
India’s foreign exchange rules are complex.
It is using overseas platforms for investment or receipt of funds may require compliance with FEMA.
The government has flagged cross-border crypto use as an area of concern (and may treat it as capital movement).
Expect tighter scrutiny.
Practical advice
If you maintain foreign exchange or use foreign custodians, record every transfer and conversion to INR.
Disclose holdings in the ITR/FA schedules.
DeFi, staking, lending and NFTs — are they treated differently?
Tax and reporting rules target transfers of VDAs.
That means many DeFi activities (swaps, lending, staking rewards, airdrops, NFTs) produce taxable events or taxable income:
Staking / rewards / airdrops can be taxed as income at normal rates or as VDA income depending on the facts.
Government guidance has treated many token incomes as taxable (and Section 115BBH’s wide scope can capture them).
Keep records of receipt date and market value in INR.
DeFi swaps — swapping one token for another may be treated as a transfer. Gains on the swap may be taxable. Platforms facilitating such swaps that are “reporting entities” could have reporting obligations.
NFTs — treated as VDAs in most Indian guidance, sale or transfer triggers tax.
RBI’s Digital Rupee (CBDC) vs. private crypto
India is building a central bank digital currency (CBDC) called the “Digital Rupee.”
A CBDC is legal tender issued by RBI and is different from private cryptocurrencies.
The RBI has consistently warned that private crypto is not legal tender and carries risks for monetary policy and financial stability.
Expect the RBI to continue to prohibit banks from certain crypto activities and to demand strict safeguards if banks or payment firms touch crypto.
International snapshot — how other countries regulate crypto in 2025
Understanding global rules is useful because crypto is global. Here’s a short, plain view of the main approaches (with examples):
EU — Comprehensive regulation (MiCA)
The EU implemented the Markets in Crypto-Assets Regulation (MiCA).
MiCA creates unified rules across EU member states for issuers, service providers, and stablecoins (e-money tokens).
It sets licensing, disclosure, governance and capital/reserve requirements for issuers and CASPs (crypto-asset service providers).
EU member states are issuing MiCA licenses to exchanges and wallets under these rules.
USA — Enforcement + stablecoin law (2025 GENIUS Act)
For years the U.S. relied on enforcement by SEC, CFTC and DOJ.
In mid-2025 the U.S. enacted a major stablecoin law (often called the GENIUS Act in 2025).
That created a federal regime for payment stablecoins and clarified oversight for certain stablecoin issuers.
The SEC continues to enforce securities laws where tokens meet the securities test, but the U.S. moved toward clearer rules for stablecoins in 2025.
UK — FCA: registration and AML first
The UK’s FCA focuses on AML/KYC and registration.
It is gradually rolling out more comprehensive rules for crypto businesses.
And also has tightened oversight on financial promotions and consumer protections.
Singapore — MAS: clear licensing for token services
Singapore’s Monetary Authority (MAS) runs a licensing and supervisory regime for digital token service providers (under the Payment Services Act and related notices).
MAS provides granular guidance on the “travel rule” and AML standards.
Singapore is seen as a clear, business-friendly but strict AML jurisdiction.
Japan — Regulated, early adopter
Japan treats crypto exchanges as licensed financial businesses (Payment Services Act) with strong AML rules and investor protection measures.
The FSA is active in supervising exchanges.
Switzerland — DLT Act + FINMA oversight
Switzerland has a friendly but strict framework (DLT Act) and active FINMA guidance for banks and custodians holding crypto.
It supports tokenization but with supervision.
China — Strict ban
China banned private crypto trading and mining (enforcement stepped up in 2021 and beyond).
Crypto business activities are illegal in mainland China.
Legal-tender experiments — El Salvador
El Salvador famously made Bitcoin legal tender in 2021.
Later policy changes and IMF engagement led to reforms that limited mandatory acceptance and clarified the role of Bitcoin in national policy.
The El Salvador example shows legal-tender experiments are politically fraught and often revised.
What you should do today (if you hold, trade or run a business with crypto)
If you live in India or serve Indian customers, do this now:
For all users
- Keep clean records: exchange statements, wallet addresses, tx hashes, INR value at time of transaction.
- Report foreign holdings in ITR schedules (if applicable).
- Save PAN details and link them properly to your crypto accounts.
For traders
- File correct income in ITR — treat VDA gains under Section 115BBH (30%).
- Claim TDS deducted and reconcile with Form 26AS.
For exchanges / founders
- Register with FIU where applicable and follow PMLA/KYC directions.
- Build reporting exports to comply with Section 285BAA rules (transaction-level statements).
- Implement TDS collection logic and audit trails.
For businesses accepting crypto
- Do not treat crypto as cash; understand tax and accounting.
- Make acceptance optional and document INR equivalent values.
When in doubt, consult a tax or compliance lawyer — these rules change and are legally technical.
Conclusion On Crypto Rules and Regulations in India
Crypto is not legal tender in India. It is allowed to be held and traded, but it is strictly taxed and heavily regulated for AML and reporting.
Budget 2025 = more reporting, same tax. The 30% flat tax stayed. Budget 2025 added tighter reporting (285BAA) and clarified definitions. Expect exchanges to send transaction data to tax authorities.
Keep records, follow KYC, and pay attention to TDS. If you trade, you must document everything and ensure PAN is linked to avoid higher withholding.
International rules vary — The EU has MiCA. The US passed a stablecoin law in 2025. And other countries either ban, regulate tightly, or experiment. India is watching global policy but focuses on tax and AML at home.
Frequently Asked Questions
What are the regulations on cryptocurrency in India?
Cryptocurrency is not legal tender in India. But trading, investing, and mining are allowed under a regulatory grey area (i.e. not explicitly prohibited). The government levies a 30% tax on gains from “virtual digital assets” and requires crypto exchanges to register with India’s Financial Intelligence Unit (FIU) under anti-money laundering rules.
What is the 30-day rule in crypto?
The 30-day rule in crypto (also called the wash sale rule) prevents investors from claiming a tax loss. If they sell a crypto asset at a loss and then repurchase the same (or substantially identical) asset within 30 days. While this rule applies to stocks in many countries, not all jurisdictions (including the U.S. currently) enforce it for crypto, though regulators are considering closing that gap.
Is 70% tax on crypto in India?
No — India does not impose a 70% tax on crypto. The law imposes a flat 30% tax on gains from virtual digital assets, plus applicable surcharge and cess, along with a 1% TDS on transactions.
Is crypto legal to hold in India?
Yes — holding, buying and selling crypto is not banned for individuals. But crypto is not legal tender; tax and AML rules apply. Courts and regulators have prevented an absolute banking ban, but RBI warns about risks.
What is the tax rate if I make profit from crypto?
30% under Section 115BBH (plus surcharge and cess).
Is TDS deducted on crypto sales?
Yes — 1% TDS on transfer payments under Section 194S (subject to thresholds and exceptions in rules)
Do I have to declare crypto held on foreign exchanges?
Yes — disclose foreign assets in tax filings and keep records. Non-disclosure can invite penalties and FEMA scrutiny.
Will India ban private crypto?
As of Budget 2025, India tightened reporting and tax rules rather than imposing a fresh ban. Government documents show caution about systemic risks. But no outright ban was implemented in 2025. Policy remains fluid.
