Is cryptocurrency trading legal in India? Yes: buying, holding and selling crypto is lawful for residents, ever since the Supreme Court struck down the RBI’s 2018 banking ban in 2020, but crypto isn’t legal tender, gains face a flat 30% tax with 1% TDS and exchanges must register with the Financial Intelligence Unit under anti-money-laundering law. India still has no dedicated crypto statute, and the long-promised discussion paper was shelved again in 2026. This is general information, not legal, tax or investment advice.
What Holds True Today
- Legal status: legal to buy, hold and trade, but not legal tender
- Tax: a flat 30% on gains, no set-off of losses and 1% TDS on transfers
- Exchanges: must register with FIU-IND under the Prevention of Money Laundering Act
- Regulation: no licensing or consumer-protection regime has been enacted
- Risk: unregistered platforms can be blocked, trapping funds
The Ruling That Reopened the Door
Banks were once barred from serving crypto.
- The RBI imposed a banking ban on crypto transactions in 2018, according to Sumsub, and the Supreme Court lifted it in March 2020
- In Internet and Mobile Association of India v. Reserve Bank of India, the Court held the restriction disproportionate, according to RVR Attorneys
- The RBI later told banks the 2018 circular was no longer valid and couldn’t be cited, according to a Gulf News report from the time
- Since that judgment, crypto trading has been legal in India, according to Sansa Legal
Legal but Not Money
The distinction matters.
- Crypto is legal in India but is not legal tender, according to Sansa Legal
- You can’t use it as currency, and the RBI still says only the rupee, digital or otherwise, counts, according to RVR Attorneys
- The RBI told Parliament in July 2026 that crypto should not be legalised and pressed the Digital Rupee as the alternative, according to Sumsub
The Tax Bite
India taxes crypto heavily.
- Budget 2022 introduced a 30% tax on gains from virtual digital assets and 1% TDS, according to The Blockverse
- Gains are taxed at a flat 30% regardless of holding period, and losses can’t be offset against other income, according to KoinX and Legal Service India
- The February 2026 Budget kept the 30% levy and the 1% TDS, according to Sumsub
- TDS applies on transfers above ₹10,000, according to Sansa Legal and Sumsub, although one trading blog says ₹50,000 annually, so check your exchange’s statement
- The Income-tax Act, 2025, effective 1 April 2026, brings new reporting duties, as covered in the mining piece in this series
Anti-Money-Laundering Rules
Exchanges face bank-style obligations.
- In March 2023, VDA service providers were brought under the Prevention of Money Laundering Act, according to The Blockverse
- Exchanges and wallet providers must register with FIU-IND, follow KYC, monitor transactions and file suspicious transaction reports, according to Coingabbar
- As of early 2026, 49 exchanges, 45 domestic and 4 offshore, were registered, according to Legal Service India, and Sumsub says almost 50
- Registered exchanges carry the same compliance obligations as banks, according to the same source
Offshore Platforms
Avoiding the tax has pushed trading abroad.
- The 30% levy and 1% TDS have pushed most Indian trading offshore: 72.66% of FY25 volume, roughly $6.1 billion, occurred on international exchanges, according to Sumsub
- The FIU has taken action against offshore exchanges operating without registration, including show cause notices and blocking access, according to Sansa Legal
- A penalty against Binance in 2024 forced major venues to register before re-entering, according to Crypto Regulations
- Unregistered platforms can be blocked at any time, potentially locking your funds, according to Legal Service India
The Regulatory Vacuum
Policy is stuck.
- A comprehensive crypto bill was drafted but never introduced, as Unchained Summit noted in another piece I used for the mining article
- The long-promised regulatory discussion paper was shelved again in April 2026, with the RBI’s opposition cited, according to Sumsub
- No licensing, custody or market-conduct regime exists, according to Crypto Regulations, which describes India as “taxed and surveilled, but still no framework”
- Oversight is split between the Finance Ministry, the RBI, the FIU and possibly SEBI, which has floated regulating tokens that function like securities, according to RVR Attorneys
What the Law Doesn’t Do for You
The absence of a framework has consequences.
- There’s no statutory investor protection if an exchange fails
- Crypto isn’t a recognised currency, so disputes fall under general contract, consumer and criminal law, which these sources don’t detail
- Stablecoin status is unsettled, according to Sumsub, which has a section on it
Compliance Steps for Traders
A practical routine keeps you safe.
- Use only FIU-registered exchanges and complete KYC
- Keep records of every purchase, sale, swap and transfer
- Report the transactions in Schedule VDA of your return, according to The Blockverse
- Remember that no expenses except the cost of acquisition are deductible
- Check TDS certificates against your records
- Take advice from a chartered accountant, particularly if you swap between tokens
Traps to Avoid
Several shortcuts cause trouble.
- Peer-to-peer trades are taxed the same way, with 1% TDS above the threshold, according to KoinX
- Moving funds to unregistered offshore platforms to avoid TDS can bring scrutiny and blocking
- “Guaranteed return” crypto schemes may be pyramid or Ponzi arrangements, which are illegal, as I covered earlier in this series
What’s Changed Recently
A quick timeline helps.
- 2018: RBI banking ban
- March 2020: Supreme Court strikes it down
- 2022: 30% tax and 1% TDS introduced
- March 2023: PMLA extended to VDA businesses
- 2024: FIU penalty on Binance and blocking of offshore exchanges
- February 2026: Budget leaves tax unchanged
- April 2026: discussion paper shelved
- July 2026: RBI tells Parliament crypto should not be legalised
Where the Sources Disagree
A few details differ.
- The TDS threshold, ₹10,000 in most sources and ₹50,000 in one
- The number of FIU-registered exchanges, 49 or “almost 50”
- How firmly regulators will move on a future framework, which no source can confirm
- Many of these are exchange and trading-blog sources, so verify tax points with the Income Tax Department
FAQs
Q1. Is cryptocurrency trading legal in India?
Yes. Buying, holding and selling crypto is legal since the Supreme Court’s 2020 ruling, but it isn’t legal tender and is heavily taxed.
Q2. How much tax do I pay on crypto gains?
A flat 30% plus cess on gains, with no set-off for losses and 1% TDS on transfers above the threshold.
Q3. Do crypto exchanges need to be registered?
Yes. Exchanges and VDA service providers must register with FIU-IND under PMLA, and unregistered platforms can be blocked.
