Legal Status of Cryptocurrency in India (2025)
Cryptocurrencies are not recognized as legal tender in India, meaning they cannot be used for everyday transactions like the Indian Rupee. However, buying, selling, and holding digital assets such as Bitcoin and Ethereum is legal.
Back in 2018, the Reserve Bank of India (RBI) had imposed a ban that restricted banks from supporting crypto transactions. However, in a landmark judgment in March 2020, the Supreme Court of India overturned this ban, stating it was unconstitutional. This gave crypto businesses the green light to resume operations.
Major international exchanges like Coinbase have registered with India’s Financial Intelligence Unit (FIU), allowing them to operate legally in the country.
Is Crypto Taxed in India?
Yes, gains from cryptocurrency are taxable in India. The government’s official stance on cryptocurrencies and other VDAs was clarified in the 2022 Budget.
Taxation and Compliance Requirements
India has implemented a rigorous tax regime for cryptocurrencies
- 30% Flat Tax on Profits: All gains from trading or transferring cryptocurrencies are taxed at a flat rate of 30%, regardless of the holding period.
- 1% TDS (Tax Deducted at Source): A 1% TDS is levied on crypto transactions exceeding ₹50,000 annually (₹10,000 in certain cases), aiding in transaction tracking.
- No Loss Offsetting: Losses from crypto trading cannot be offset against other income or carried forward to subsequent years.
- Mandatory Reporting: Investors must report crypto holdings and gains in their Income Tax Returns under the Virtual Digital Assets (VDA) schedule.
- Anti-Money Laundering (AML) Compliance: Crypto platforms must adhere to the Prevention of Money Laundering Act (PMLA) and implement Know Your Customer (KYC) protocols.
What Type of Crypto Transactions are Taxable in India?
Here’s a list of crypto activities that are liable to tax:
1. Selling Crypto for INR (Fiat Currency)
If you sell Bitcoin, Ethereum, or any crypto and receive INR in your bank account — the profits are taxed at 30%.
2. Trading One Crypto for Another
Even if you never convert your crypto to INR, exchanging BTC for ETH (or any pair) is still considered a taxable event.
3. Using Crypto to Buy Goods or Services
If you pay for a product/service with crypto, the difference between the buying price and market value on the day of payment is taxed.
4. Airdrops, Rewards, or Staking Income
Any crypto received for free or as a reward — through airdrops, staking, or referrals — is considered income and is taxed under “Income from Other Sources.”
5. Mining Crypto
Mined crypto is also taxed under “Income from Other Sources” at the market value on the date you receive it.
6. Gifted Crypto is Also Taxable
If you receive crypto as a gift, it’s taxable under ‘Income from Other Sources’ if the value exceeds ₹50,000 (unless received from a relative).
How is Crypto Tax Calculated in India?
There are two types of tax you need to consider:
1. Flat 30% Tax on Gains
- Applies to any profit from transfer of a VDA.
- No deduction allowed except for the cost of acquisition.
- No set-off of losses from other heads of income
2. 1% TDS (Tax Deducted at Source)
- Deducted at the time of each sale transaction.
- Applies if annual transaction volume exceeds ₹50,000 (₹10,000 for some cases like individuals without business income).
Understand the Basics
- If you buy Bitcoin for ₹1,00,000
- And sell it later for ₹1,50,000
- Your profit = ₹50,000
- Tax = 30% of ₹50,000 = ₹15,000
- TDS = 1% of ₹1,50,000 = ₹1,500 (already deducted by exchange)
our net earnings = ₹1,33,500
What If You Made 100s of Transactions?
If you are a regular crypto trader using multiple exchanges and wallets, tracking each trade manually is almost impossible.
This is where crypto bookkeeping software becomes essential.
Crypto bookkeeping means importing, classifying, and verifying all your crypto transactions across platforms. It ensures that: all your gains are correctly calculated, Tax is accurately reported, You avoid mistakes that could trigger penalties
Crypto Bookkeeping Involves:
- Importing Transactions
From exchanges like WazirX, CoinDCX, Binance, and wallets like MetaMask, Ledger. - Automatic Categorization
Software identifies trades, deposits, staking rewards, etc. - Manual Tagging
You may need to label some transactions (like internal transfers or P2P trades). - Reconciliation
Check if the books match your actual wallet holdings at the end of the year. - Generating Reports
Tools give you capital gains, holding, and income reports for ITR filing.
Popular Indian-friendly crypto tax tools: KoinX, TaxNodes, Binocs, ClearTax Crypto
Conclusion
In 2025, crypto is fully legal in India, but it is also tightly taxed and regulated. To stay on the right side of the law:
- Pay 30% tax on your crypto profits
- Ensure 1% TDS is deducted or paid
- Use crypto bookkeeping tools if you have lots of transactions
- File your ITR properly, with reports of every trade
Taking tax compliance lightly could lead to notices, penalties, or even audits from the Income Tax Department.