Cryptocurrency Regulations and Laws in India
Learn about India’s cryptocurrency regulations, taxes, and legal status. Discover how trading is taxed at 30%, how exchanges must follow AML laws, and what future crypto legislation may look like.
India has taken a cautious but evolving approach to cryptocurrency. While crypto is not banned, it is not considered legal tender, and trading is subject to taxation. The regulatory environment remains uncertain, with future legislation under discussion.
Summary
Cryptocurrencies are legal in India, but they are unregulated and taxed. The Reserve Bank of India (RBI) previously banned banks from dealing with crypto businesses, but that order was overturned by the Supreme Court in 2020. Since 2022, crypto gains are taxed, and a 1% TDS (tax deducted at source) is applied to all trades, creating friction in the market.
Legal Status
- General Use: Legal but not recognized as legal tender
- Trading: Legal but taxed and monitored
- Exchanges: Legal; must comply with KYC/AML and taxation
- Mining: Legal and unregulated
- ICOs & Tokens: Not formally regulated
- NFTs: Legal and subject to digital asset taxation
Taxation
India taxes cryptocurrencies as Virtual Digital Assets (VDAs) under the Income Tax Act. This includes crypto tokens, NFTs, and similar assets.
- Capital Gains Tax: 30% flat rate on profits from VDAs
- Income Tax on Crypto Earnings: 30% on business income involving crypto
- 1% TDS: Deducted on all crypto trades over a certain threshold
- Mining Taxation: Considered income if mined coins are sold
- Reporting Requirements: Individuals and businesses must report VDA transactions in tax filings
Regulatory Bodies
- Reserve Bank of India (RBI): India’s central bank; cautious on crypto and supports CBDC (digital rupee)
- Ministry of Finance: Oversees crypto taxation and classification
- Securities and Exchange Board of India (SEBI): May regulate crypto securities in the future
Key Regulations & Laws
- 2018 RBI Ban: Barred banks from crypto-related activity (overturned in 2020)
- 2022 Finance Act: Introduced 30% tax on VDAs and 1% TDS
- 2023 Prevention of Money Laundering Act (PMLA) Inclusion: Crypto businesses brought under AML compliance
- Future Legislation: A dedicated Crypto Bill has been drafted but not yet passed
Timeline of Regulatory Milestones
| Year | Event | Description |
|---|---|---|
| 2018 | RBI ban | Prohibited banking for crypto firms |
| 2020 | Supreme Court ruling | Overturned RBI’s crypto banking ban |
| 2022 | Crypto tax introduced | 30% tax + 1% TDS under Finance Act |
| 2023 | AML laws extended | Exchanges and custodians fall under PMLA |
| 2024 | Crypto Bill discussions | Parliament continues to debate crypto-specific law |
Resources
- Reserve Bank of India
- Ministry of Finance
- Income Tax India
- SEBI
- Crypto Tax Guidelines – Income Tax Dept
Notes
- Travel Tip for Crypto Users: Crypto is legal to use and hold, but not accepted for payments. Use caution when converting or trading large amounts on Indian exchanges due to strict tax enforcement.
- Local Adoption Trends: High adoption among retail traders, despite a slowdown due to high tax rates.
- Language Notes: Official documents available in English and Hindi.