Introduction:
Cryptocurrency has become a topic of discussion across the world today and India is also not untouched by it. From Bitcoin to Ethereum to Meme coin and NET, digital assets are attracting visitors from all walks of life.
But with this growing interest comes a big question: Is Cryptocurrency legal in India?
In this blog, we will learn about the rules, tax system and current laws on cryptocurrency. like traditional currency, it is not controlled by any government or bank.
Some Major Cryptocurrencies:
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (Tether-USDT)
- Ripple (Ripple- XRP)
Brief History of Crypto in India:
The government stance on cryptocurrencies in India has changed from time to time. Below is a short timeline-
| Year | Event |
| 2013 | RBI issued the first warning regarding bitcoin |
| 2018 | RBI bans banks from transactions with crypto exchanges. |
| 2020 | Supreme Court lifts RBI ban. crypto trding allowed. |
| 2021 | Governments hints at regulating crypto |
| 2022 | A 30% tax on crypto was imposed in the budget. |
| 2023-24 | Pilot test of digital rupee with 1% TDS implemented |
Is cryptocurrency legal in India?
Yes, cryptocurrency is legal in India – but with limitations and laws on cryptocurrency
As of 2025:
- Cryptocurrency is not banned in India
- But it is not legalized as a legal tender.
- You can buy, sell, hold or trade cryptocurrencies, but it is mandatory to comply with government regulations and tax rules.
That means there is no ban on crypto, but you cannot use it like Indian Rupee.
Government entities involved in framing and enforcing laws on cryptocurrency regulations:
1.Rserve bank of India (RBI)
Opposes recognizing crypto as a currency.
Digital rupee has been created.
2. Security and exchange board of India (SEBI):
Investment based crypto may be monitored in the future.
Emphasis on investor protection and transparency.
3. Cental Board of Direct Taxes (CBDT):
Crypto imposes taxes on you
4. Financial Intelligence Unit (FIU):
Monitors suspicious transections, mandates reporting to the exchange under PMLA.
Tax rules on crypto in India:
1.Flat tax of 30%:
If you have made a profit by selling crypto, you will have to pay 30% tax on it. Only the purchase price can be deducted, no other deduction will be available.
Example:
- Bought Bitcoin of worth 1,00,000 rupees.
- Sell it at 1,50,000 rupees
- Profit made- 50,000
- Tax charged- 15000 which is 30% of the profit
2. 1% TDS:
- 1% TDS is levied on transactions exceeding 10,000 rupees in a year.
- Be it profit or loss – it applies to both
- TDS is deducted by the crypto exchange.
3. Losses cannot be adjusted:
Losses in crypto:
- cannot be adjusted with other income (like salary or stock market).
- It cannot be carried forward to the next year.
Crypto under PMLA law:
In March 2023, the government bought crypto under the purview of the money laundering law (PMLA).
Objectives:
- Prevent money laundering.
- Preventing terrorism from funding.
- Stop illegal activities.
It means:
- All exchanges are required to register with FIU.
- KYC required.
- Reporting of suspicious activities mandatory.
RBI and Digital Rupee
RBI has launched its own digital currency, Digital rupee, called CBDC.
| Aspect | Digitized rupee | Cryptocurrency |
| Issuer | RBI | Private/decentralized market |
| legal status | legal tender | Not Perforated (not legal tender) |
| Stability | Steady | Extreme fluctuations |
| Use | Payments, Banking | Trading, Investing, Defi |
RBI plans to eliminate the need for private crypto through digital rupee.
What is legal In India?
✅Valid:
- buying/Selling crypto on a registered exchange
- Holding in digital wallet
- Paying taxes and declaring income
- Transfer between wallets
❌Illegal:
- Buying/Paying something with crypto
- Not showing crypto income in Income tax returns
- Purchase of illegal goods
- Trading on foreign exchanges that are not registered in India
Popular Crypto Exchanges in India:
use only those exchanges that are registered under FIU
- WazirX
- CoinDCX
- ZebPay
- CoinSwitch
- Giottus
These Exchanges follow KYC process, TDS, and PMLA rules and laws on cryptocurrency.
Challenges in framing and enforcing laws on cryptocurrency regulation in India:
1.Lack of clear definition: crypto has not yet been defined as a currency, asset, or security.
2. Risk of misuse: Scams, money laundering and hacking cases have come to light.
3. Uncertainty and volatility: Risky for investors, especially beginners.
4. Lack of investor protection: Like the stock market, there is no regulatory body (like SEBI)
Global Influence and India Policy;
India is now moving ahead with a global outlook:
- G20 Presidency (2023): Need for global crypto regulations highlighted
- India’s support to IMF and FSB guidelines
- In the future, an international framework may be created which all countries will adopt
Future of Crypto and Laws on Cryptocurrency in India:
What can be expected:
- A crypto regulation bill may be introduced to define laws on cryptocurrency in India.
- Formation of a SEBI- like body, especially for crypto
- Crypto can be classified as an ‘asset’ or ‘commodity’
- Reforms in the tax system such as allowing deficit set-off
Expert’s Opinion: 1. Experts believe that crypto will be regulated, but not completely vanquished.
2. RBI will continue to promote digital rupee.
Tips for crypto users:
- Use only registered exchanges
- keep complete records- of all purchases, sales, and transfers
- Fill out income tax returns correctly show crypto income clearly
- Be aware of the rules and keep an eye on government updates
- Avoid scams- Beware of high profit schemes
Conclusion:
Cryptocurrency is not illegal in India, but it comes under strict monitoring and regulations. You can invest, but it is necessary to follow tax rules, PMLA law and procedures like KYC.
The government wants to create a balanced law on cryptocurrency that will enable the development of technology, but will also avoid financial risks and misuse.