Is crypto regulated in India? The short answer: yes, but not how you might expect. You can buy, sell, and hold Bitcoin, Ethereum, and other digital assets without breaking the law. But the government isn’t cheering you on-it’s watching, taxing, and tracking every move. If you’re trading crypto in India, you’re not in a legal gray area anymore. You’re in a very clear, very strict tax system that treats your digital assets like high-risk investments-with no deductions, no loss offsets, and no mercy.
What’s Actually Legal? Crypto as a Virtual Digital Asset
As of August 2025, India officially recognizes cryptocurrencies as Virtual Digital Assets (VDAs) under the Income Tax (No. 2) Bill, 2025. This law replaced the old Section 2(47A) and gave the government a legal framework to tax crypto without calling it money. So, you’re not breaking any law by owning Bitcoin. But here’s the catch: the government says it’s not money. You can’t use it to pay for groceries, rent, or even a chai at your local stall. The rupee is still the only legal tender. Crypto? It’s just a digital asset-like a collectible, but tracked by blockchain. This definition covers more than just Bitcoin and Ethereum. It includes NFTs, stablecoins, and any token built on cryptography. Even if you minted an NFT of your cat last year, that’s a VDA. And if you sold it for profit? You owe taxes.The 30% Tax That Changes Everything
India has one of the highest crypto tax rates in the world: 30% on every profit you make from selling, trading, or exchanging VDAs. No exceptions. No deductions. Not even if you lost money elsewhere in your portfolio. Let’s say you bought 0.5 BTC for ₹15 lakh in 2023 and sold it for ₹25 lakh in 2025. Your profit? ₹10 lakh. You owe ₹3 lakh in taxes. Period. You can’t use losses from selling Solana to reduce that bill. You can’t claim expenses like exchange fees, gas costs, or even the cost of your hardware wallet. The tax man doesn’t care. He just sees the gain. This isn’t like capital gains on stocks or mutual funds. There’s no indexation. No long-term vs short-term distinction. Just 30% on the profit, full stop. That’s why many traders in India now treat crypto like gambling-because the tax system treats it the same way.The 1% TDS That’s Making Heads Spin
On top of the 30% tax, there’s a 1% Tax Deducted at Source (TDS) on every crypto transaction. That means if you sell ₹100,000 worth of Ethereum, ₹1,000 gets taken out before you even see the money. The exchange does it automatically. You don’t get to choose. This TDS isn’t your final tax-it’s a prepayment. You still have to file your income tax return and report all VDA transactions. If you paid more TDS than your actual tax bill, you might get a refund. But if you underpaid? You’ll owe the difference, plus interest. The TDS rule applies to every transfer: buying crypto with INR, selling crypto for INR, swapping one crypto for another, even using crypto to buy goods or services. If it’s a VDA transaction, TDS applies. That’s why many Indian exchanges now block peer-to-peer trades. They can’t track them. And if they don’t deduct TDS, they risk penalties.
Who’s Watching You? The Agencies Behind the Scenes
You’re not just dealing with one government department. You’re under surveillance by multiple agencies working together. The Income Tax Department and the Central Board of Direct Taxes (CBDT) are the main enforcers. They’ve been sending out notices since 2019 to people who traded crypto but didn’t report it. These notices ask for bank statements, wallet addresses, transaction histories-everything. Ignore them? You’ll face penalties, interest, and possibly a raid. The Financial Intelligence Unit India (FIU-IND) tracks suspicious activity. All crypto exchanges registered in India must report large or unusual transactions to them. That includes transfers over ₹10 lakh in a single month. If you’re moving large sums between wallets, expect scrutiny. The Reserve Bank of India (RBI) doesn’t regulate crypto directly, but it controls the banking system. Banks can’t open accounts for unregistered crypto firms. And while the RBI’s 2018 banking ban was struck down by the Supreme Court in 2020, the central bank still warns that crypto is risky and not legal tender. The Securities and Exchange Board of India (SEBI) has floated ideas about regulating crypto trading like stocks. But as of 2026, that’s still just talk. No rules yet.The Rollercoaster: From Ban to Tax
India’s crypto journey has been chaotic. In 2013, the RBI first warned about Bitcoin. By 2018, it banned banks from serving crypto businesses. That killed most exchanges overnight. Traders turned to P2P platforms. Some left the country. Then came the Supreme Court’s 2020 ruling. The banking ban was illegal. Exchanges like WazirX, CoinSwitch, and ZebPay came roaring back. But the government didn’t embrace crypto. It just changed tactics. Instead of banning it, they decided to tax it heavily. The 2022 budget introduced the 30% tax and 1% TDS. Then came the 2025 law that gave it legal teeth. The government didn’t need to ban crypto to control it. It just made it expensive and tracked.
What’s Still Unclear?
Even with the 2025 law, big questions remain unanswered. - Can you inherit crypto? No clear rules on estate planning for VDAs.- What if you lose your private keys? Can you claim a loss? No. The tax code doesn’t recognize it.
- Are mining rewards taxable? Yes. But how do you value them when mined? The government hasn’t said.
- What about DeFi staking or yield farming? Still in the gray zone. Some experts say it’s taxable income. Others say it’s not a transfer yet. No official guidance.
- Can you send crypto abroad? You can, but you’ll need to report it under the Liberalized Remittance Scheme (LRS). The limit is $250,000 per year. And you’ll pay tax on any gains. The law doesn’t cover these edge cases. That means you’re on your own. If you’re doing anything beyond simple buying and selling, consult a tax professional who understands VDAs.
What About the Future?
India is part of the G20’s global crypto reporting system. That means your crypto transactions could soon be shared with other countries-like the U.S., U.K., or Australia-automatically. If you’re hiding crypto income from the Indian tax department, you’re not just risking local penalties. You’re risking international exposure. The government is also working on its own digital currency-the Digital Rupee. It’s a central bank digital currency (CBDC), not crypto. It’s centralized, traceable, and fully controlled by the RBI. That’s the future they want: digital money they can monitor, not decentralized assets they can’t. There’s no sign of a full ban coming back. But there’s also no sign of legalization. India’s approach is simple: tax it, track it, and keep it from becoming a threat to the rupee.What Should You Do?
If you’re trading crypto in India in 2026, here’s what you need to do:- Track every transaction: buys, sells, swaps, gifts, staking rewards.
- Use accounting tools like Koinly, CoinTracker, or even Excel to log dates, amounts, and values in INR.
- Calculate your gains accurately-remember, no loss offsets.
- File your ITR-2 or ITR-3 with Schedule VDA (Virtual Digital Asset) included.
- Keep proof of TDS deducted from exchanges (it’s in your transaction history).
- Don’t ignore notices from the tax department. They’re not warnings. They’re demands.
Is it legal to buy and hold Bitcoin in India?
Yes, it’s legal to buy, hold, and sell Bitcoin and other cryptocurrencies in India as of 2026. They are recognized as Virtual Digital Assets (VDAs) under the Income Tax (No. 2) Bill, 2025. However, they are not legal tender, meaning you can’t use them to pay for goods or services officially. The government allows ownership but heavily taxes any gains.
Do I have to pay tax on crypto even if I didn’t sell it?
No, you only pay tax when you sell, trade, or exchange crypto for another asset or INR. Holding crypto without selling doesn’t trigger a tax event. But if you receive crypto as income-like from staking, airdrops, or mining-that’s taxable as income in the year you receive it, even if you don’t sell it right away.
What happens if I don’t report my crypto income?
The Income Tax Department actively tracks crypto transactions through exchange reports and FIU-IND data. If you don’t report, you’ll likely receive a notice asking for details. Ignoring it can lead to penalties of up to 200% of the tax evaded, interest charges, and in extreme cases, legal action. The government has already sent thousands of notices to unreported traders since 2019.
Can I use losses from crypto to reduce my tax bill?
No. Under India’s current tax law, losses from selling one cryptocurrency cannot be used to offset gains from another. You can’t deduct crypto losses against stock gains, rental income, or salary. Each VDA transaction is taxed on its own profit, and losses are ignored for tax purposes. This makes crypto trading one of the most punitive investment categories in India.
Are NFTs taxed the same as Bitcoin in India?
Yes. NFTs are classified as Virtual Digital Assets under the same 2025 law. Any profit from selling, trading, or exchanging an NFT is taxed at 30%. The 1% TDS also applies to NFT transactions. Whether it’s a JPEG of a monkey or a digital real estate token, if it’s on a blockchain and traded for value, it’s treated the same as Bitcoin or Ethereum for tax purposes.
Can I send crypto from India to another country?
Yes, but it’s limited. Under the Liberalized Remittance Scheme (LRS), you can send up to $250,000 per year abroad, including crypto. However, you must report the transfer to the RBI through your bank. Any profit you made on that crypto before sending it is still taxable in India at 30%. The destination country may also tax it-so you could face double taxation unless there’s a treaty.
Will India ban crypto in the future?
It’s unlikely. The government has moved past the idea of a ban. Instead, it’s betting on control through taxation and tracking. The 2025 law shows they prefer to tax crypto rather than ban it. A ban would push trading underground, reduce tax revenue, and hurt innovation. The current model lets them collect billions in taxes while keeping crypto from disrupting the rupee. A ban is no longer the goal-regulation is.
