Is Cryptocurrency Legal in India? 2025 Crypto and Bitcoin Law Update

In 2025, the country's cryptocurrency landscape is defined by heated debate, new rules for compliance, and updated taxation. Cryptocurrencies have not been recognized as official currency by the government but due to their current legal status they can be used and traded.

Legal Status of Crypto in India

The question whether cryptocurrency is legal in India continues to dominate financial discussions. Cryptocurrencies are not legal tender, however, they are not prohibited. The Supreme Court of India overturned RBI restrictions in 2020, permitting banks to offer exchanges.

The cryptocurrency status in the country allows citizens to keep digital assets and conduct trading on permitted platforms, while the government of India enforces laws on taxation and reporting. So crypto is legal in India for trading and investment, but it is not recognized as official fiat money.

How India Regulates Cryptocurrency: Key Laws and Institutions

Rather than an outright ban on cryptocurrencies, India has taken to a compliance-heavy stance. The cryptocurrency regulations in India aim to enforce transparency, taxation, and investor protection without describing digital assets as a legal tender. India's government established several committees and monitoring bodies to oversee exchanges, transactions and the reporting standards.

Reserve Bank of India and Crypto Policy

The Securities and Exchange Board of India (SEBI) works alongside the Reserve Bank, but the RBI remains the most influential authority. While crypto is not recognized as official money, the RBI oversees payment systems and systemic risks while working on the central bank digital currency, the Digital Rupee.

FIU-IND Registration Requirements for Exchanges

All major exchanges in India have to be registered with FIU-IND, which enforces know your customer checks to stop online payment fraud. This ensures that the current legal structure decreases illicit use.

Income Tax Department and Crypto Compliance

Starting with Income Tax Returns for FY 2025–26 (Assessment Year 2026–27), Indian tax authorities require citizens to report crypto transactions under a dedicated section named Schedule VDA in the ITR. The authority imposes penalties for unreported profits, ensuring that every cryptocurrency trade becomes visible in the system.

Taxation of Cryptocurrency in India

Taxation plays a central role in defining the legal status of cryptocurrency in India. From April 2022, income from the transfer of crypto assets has been taxed at a flat rate of 30%, plus applicable surcharge and cess, along with a 1% TDS on transfers and (as of 2025) GST on trading and service fees.

This means gains from selling or trading in Bitcoin or other digital assets are treated separately from stocks. No deductions are allowed other than acquisition cost, and losses from cryptocurrencies in India cannot be offset against other income. As of July 7, 2025, regulators are considering applying an 18% GST to crypto trading and service fees, which, if implemented, could put a heavier tax burden on investors.

Tax Rules for Buying, Selling and Trading Crypto

Every cryptocurrency trade is subject to tax when sold or exchanged. In addition, a 1% TDS (tax deducted at source) applies on each transaction above certain limits, which helps the government of India track crypto transactions.

Crypto Income Reporting Requirements in India

Indian residents must report cryptocurrency ownership and income annually. Failure to declare can be treated as illegal in India and may invite penalties. In practice, people in India are free to buy and sell crypto, yet coins cannot be used as official currency for payments.

Crypto Trading, Buying and Investing: What’s Allowed

Trading and investment in digital currencies are permitted in India under regulation. Locals can legally purchase, hold and trade crypto assets such as Bitcoin and Ethereum through registered exchanges as long as they follow know your customer requirements and other tax responsibilities.

Top Crypto Exchanges Regulated in India

The Securities and Exchange Board of India does not directly license trading platforms, but exchanges must register with the country’s Financial Intelligence Unit (FIU-IND) to operate within the confines of the law.

Among the most popular exchanges in India are CoinDCX, WazirX and ZebPay, which are compliant with the rules for crypto transactions. Such platforms support KYC, anti-money laundering checks and transparent reporting, giving investors a safer entrance to the crypto market. In March 2025, Coinbase returned to India after having gained approval to register with the FIU-IND, a move that shows increasing regulatory interest.

Crypto Investment vs Trading: Legal Nuances

Indian investors can hold crypto assets as long-term virtual investments or can trade them on a short-term basis. Both will be allowed, but the way gains are taxed may differ according to the duration and nature of the gain. For instance, trading is allowed but considered a taxable activity, while investment may also trigger taxation when profits are realized.

Bitcoin and Crypto Mining: Legal or Not?

Mining isn’t banned by the Supreme Court of India and there is no explicit cryptocurrency law that makes mining illegal. There is no licensing, meaning anyone can run a rig as long as they adhere to electricity and environmental standards. Nevertheless, there are no government controls on cryptocurrency mining, so the activity operates in a legal grey area.

In India, mined coins are taxed just like other cryptocurrencies, at a flat rate of 30% when sold or exchanged. Although trading is legal, high electricity costs and concerns over illegal uses can pose some challenges.

Digital Rupee vs Private Cryptocurrencies

India has launched the Digital Rupee, the official digital currency, via the Reserve Bank of India’s Digital Rupee pilot. The project is in line with the government’s move to offer a controlled alternative to private tokens. The Digital Rupee is backed by the central bank, designed to act as an electronic and secure form of cash and is incorporated into the banking infrastructure.

At the same time private cryptocurrencies are not considered to be legal tender in India, although they are not prohibited to trade or invest in under the existing regulations. Businesses that want to accept Bitcoin or other tokens typically use a cryptocurrency payment gateway, which converts crypto into INR or other fiat currencies in order to remain compliant.

Challenges and Legal Risks for Crypto Users in India

There are still substantial risks for users even as trading becomes legal. Cryptocurrencies in India do not have the status of legal currency, so they cannot be used like rupees for payments. Price swings leave investors susceptible to sudden losses, while frequent regulation changes may add some uncertainty for businesses.

A key challenge is taxation. India imposes a 1% TDS on crypto transactions from July 2022 which leads to decreased market liquidity and more reporting requirements for both traders and exchanges. A flat rate of 30% on gains adds to pressure for active investors.

Compliance is another factor. Fiat payment processing platforms are required to follow the PCI compliance rules while all exchanges must meet strict KYC standards and anti-fraud monitoring to prevent payment fraud.

The Future of Crypto: Regulation and Innovation

The government of India is likely to improve the cryptocurrency law while keeping in balance innovation and regulation. Suggestions include clearer rules for NFTs, tighter oversight by the Securities and Exchange Board of India, and frameworks to regulate cryptocurrencies in India. Fintech expansion may as well facilitate adoption of a white label payment gateway solution handling fiat and crypto.

Conclusion

As of 2025, cryptocurrencies in India are legal to trade and invest in but are not recognized as official currency. As the cryptocurrency regulations in India are taking shape, locals can store crypto assets under certain tax regulations. The interplay of compliance, taxation, and innovation paves the way for India’s digital finance industry.