News

Is Cryptocurrency Legal in India in 2025? Trading, Laws & Legality Explained

2025-09-18 13:37
Cryptocurrency has become a mainstream topic nationwide. Millions of people ask one thing: is cryptocurrency legal in India?
By 2025, the answer is clear but layered. Crypto is not banned, but it is not legal tender. It is classified as a Virtual Digital Asset (VDA). VDAs face strict taxes, compliance checks, and government monitoring. This guide explains the rules, trading, taxation, crypto cards, and which activities are legal or restricted. It helps people and businesses work in India’s changing crypto market.

Cryptocurrency in India: Legal or Illegal?

When it comes to cryptocurrency in India legal or illegal, the answer is mixed. Bitcoin, Ethereum, and USDT are not banned. People can buy, sell, and hold them. What they cannot do is use them as money to pay debts or shop.
The Finance Act 2022 defines crypto as a Virtual Digital Asset. It is treated as an investment, not currency. Officials monitor transactions, and using tokens as money may bring regulatory action.
India is one of the world’s largest crypto markets. More than 119 million users hold or trade assets. Growth continues each year despite volatility. The Financial Intelligence Unit (FIU) has fined exchanges and blocked unregistered apps.
In short, crypto in India is legal for trading and investment but not for direct payments. Tax and compliance form the core of the system.

Is Cryptocurrency Trading Legal in India in 2025?

Many ask: is cryptocurrency trading legal in India 2025? The short answer is yes. Trading is legal but runs in a taxed and regulated system.
In 2020, the Supreme Court ended the Reserve Bank of India’s (RBI) ban on banking for exchanges. Since then, licensed platforms have offered trading. In 2025, users can buy and sell on registered exchanges if they follow KYC, AML, and tax rules.
Trading volumes remain high. Reports show local exchanges handle over $5 billion monthly. Oversight is tougher now. FIU registration is mandatory, and non-compliant platforms risk suspension. Courts also see more disputes. Cases include tax evasion and fraud, with dozens of rulings shaping compliance each year.

Regulatory Authorities & Oversight

Several regulators control crypto in India:
  • Reserve Bank of India (RBI): Sets monetary policy and warns banks and users about risks. Its stance affects banking support for exchanges.
  • Securities and Exchange Board of India (SEBI): Oversees securities markets. It may classify some tokens as securities, adding new duties for exchanges and traders.
  • Financial Intelligence Unit (FIU): Enforces AML rules, requires registration, and demands reports on suspicious trades.
  • Central Board of Direct Taxes (CBDT): Collects tax on crypto gains, applies TDS, and ensures reporting under Schedule VDA.
All these bodies oversee exchanges, users, and businesses. Their work keeps crypto activity transparent and under government watch.

Taxation of Cryptocurrency in India

India applies one of the strictest tax regimes. All crypto gains face a flat 30 percent tax. Every trade above the threshold triggers a 1 percent TDS under Section 194S. Losses cannot offset other income. Reporting each taxable event is required.
Government data shows tax officials collected more than ₹3,500 crore from crypto in FY2023. More taxpayers also reported such income. Investors must file under Schedule VDA in their ITR, keep records, and follow the rules to avoid penalties.

Reporting and Compliance Requirements

Crypto investors must report profits in their income tax return. They need to keep records of trades, wallet addresses, and exchange receipts. TDS deductions must be shown. Compliance also means keeping audit-ready files for each taxable event.
Common pitfalls include overstating costs, ignoring airdrops or staking income, missing trades across platforms, or not declaring small P2P transfers. Each mistake can bring audits or fines.

KYC, AML, and Crypto Exchanges

Every legal cryptocurrency app in India must follow KYC and AML rules. Users need to verify identity with Aadhaar, PAN, or other documents.
Exchanges must:
  • Register with the FIU.
  • Apply AML checks and follow the FATF Travel Rule. This rule makes exchanges share sender and recipient data such as names, account numbers, and wallet addresses once trades cross a set limit.
  • Report suspicious activity to officials.
For users, these steps bring more safety and less fraud. Verified platforms reduce scams and align with global rules.

Practical Compliance Steps for Users

To stay safe in India’s crypto market, users should:
  • Use FIU-registered exchanges.
  • Keep tax and transaction records.
  • Avoid anonymous peer-to-peer transfers.
  • Protect wallets with strong passwords and tools.

Crypto Card Solutions and Spending Abroad

Crypto is not legal tender in India. Still, people can use crypto cards abroad. Providers such as Relopay issue Visa-backed cards. These turn digital assets into fiat at the point of payment.
The cards are valid if they follow RBI’s foreign exchange rules. They let Indians shop online, pay for subscriptions, or withdraw cash overseas. Settlement is always in fiat, keeping within legal limits.
For travelers, crypto cards give a simple way to use assets worldwide. They combine convenience with broad merchant support.

Allowed Activities & Restrictions

So, is cryptocurrency trading legal in India? Yes, but only under clear rules.
Allowed activities:
  • Buying and selling on registered platforms.
  • Holding tokens as investments.
  • Paying tax on crypto gains.
  • Using crypto cards abroad.
Restricted or illegal activities:
  • Paying merchants in India with crypto.
  • Anonymous P2P deals without KYC.
  • Running unregistered exchanges.
  • Avoiding taxes or misreporting income.
Breaking these rules may lead to frozen accounts, penalties, or prosecution. For users and businesses, compliance is both a duty and a way to stay credible.

CBDC (Digital Rupee) vs Private Cryptocurrencies

India launched its Central Bank Digital Currency, the Digital Rupee (e₹). It is backed by the RBI and accepted as legal tender.
Private cryptocurrencies remain assets. The Digital Rupee is official money. The government wants to promote it for payments while limiting private crypto to investments and trading.

Challenges and Risks

Risks remain. Prices can swing 20–30 percent in days. Fraud is also a major issue. In 2023, Indians lost $44 million to scams. In 2024, Himachal Pradesh police exposed a $300 million scheme.
Between late 2023 and early 2024, quick-profit projects caused $60 million in losses. Over 11,000 fraud cases were reported in just eight months. Officials respond with fines, arrests, and scam alerts. Still, users and businesses must stick to registered exchanges and compliance to protect themselves.

Global Influences on Regulations

India’s rules are shaped by global standards. The FATF Travel Rule forces exchanges to share transaction data. The G20 pushes for tighter compliance and cross-border checks. The OECD’s Crypto-Asset Reporting Framework (CARF) sets tax reporting norms. Together, these influences align India with global practices and cut risks of laundering or tax evasion.

Future Outlook & Upcoming Legislation

India is preparing a new crypto bill. Future updates may:
  • Impose stricter licenses for exchanges.
  • Tighten rules on cross-border payments.
  • Launch sandbox programs for blockchain.
  • Clarify rules for staking, mining, and token sales.
For traders and investors, this means more duties and clearer tax rules. For businesses, it brings costs but also more legal clarity. The trend points to tighter regulation, not bans.

Practical Tips for Crypto Users

To use crypto safely, follow these tips:
  • Choose FIU-approved platforms.
  • Keep clear tax and transaction records.
  • Use hardware wallets for security.
  • Consider crypto cards for overseas spending, since they convert assets into fiat with wide support.
  • Follow RBI and SEBI updates to stay compliant.
By doing so, users and businesses cut risks while enjoying the benefits of digital assets.

Frequently Asked Questions (FAQs)

Below are concise answers to the most frequent questions on legality, trading, taxation, and compliance for cryptocurrency in India.

Is Buying Cryptocurrency Legal in India?

Answering the question is it legal to buy cryptocurrency in India: yes. People may buy Bitcoin, Ethereum, and other VDAs on registered exchanges. The Supreme Court lifted banking limits in 2020. The Finance Act 2022 classifies crypto as a Virtual Digital Asset. Ownership and acquisition are lawful if KYC and tax rules are met. Crypto is not legal tender, but holding it is allowed.

Is Cryptocurrency Taxable in India?

Yes. Since 2022, gains are taxed at 30 percent. A 1 percent TDS applies on each qualifying trade. Taxable events include selling, trading, staking, gifts, and token swaps. Investors must declare them in their ITR under Schedule VDA. This proves cryptocurrency in India legal but tightly monitored through tax.

How Can I Avoid 30% Crypto Tax in India?

There is no legal way to skip the 30 percent tax. But investors can lower their burden. Plan sales, keep accurate records, and avoid many small trades that trigger 1 percent TDS. Losses cannot offset other income. Misreporting may lead to audits, fines, or prosecution.

Is it Legal to Make Payments Using Cryptocurrency in India?

When it comes to cryptocurrency in India legal or illegal for payments, the rule is clear. Crypto is not legal tender, and merchants in India cannot accept it. Domestic deals must be in rupees. People may still use crypto cards abroad, where assets convert to fiat at purchase.

Are Crypto Withdrawals Legal in India?

Yes. Converting crypto to INR through registered exchanges is legal. Yet banks may hesitate to process such transactions. This can cause delays or limits. Withdrawals need KYC, and exchanges report them to the FIU. Conversion is allowed but closely watched.

Is Peer-to-Peer (P2P) Crypto Trading Legal in India?

Is cryptocurrency trading legal in India? P2P is allowed, but only on registered platforms such as WazirX or CoinDCX. They enforce KYC rules. Anonymous transfers or unregistered apps may be illegal and risky. Officials monitor P2P closely, and exchanges must report suspicious trades.

Can Businesses Legally Accept Cryptocurrency Payments in India?

At present, businesses in India cannot accept crypto as direct payment. Only INR and the Digital Rupee are legal tender. Firms that try to take Bitcoin or USDT risk penalties or losing bank support. They may still hold crypto as an investment.

How Can I Safely Buy Cryptocurrency in India?

The safest way is through a legal cryptocurrency app in India registered with the FIU. Complete KYC to stay compliant and avoid fraud. Keep funds in secure wallets, ideally hardware ones. Do not use unverified apps, brokers, or schemes promising big returns. Careful platform choice and good records ensure safe purchases.

Conclusion

In 2025, crypto in India is legal for investment and trading but not legal tender. People can buy, hold, and trade on registered exchanges if they follow tax, KYC, and reporting rules. Opportunities include global use with crypto cards. Risks include scams, volatility, and unclear laws. With the Digital Rupee growing and global standards shaping policy, India’s crypto scene is moving toward tighter rules but also deeper links to the financial system.

Next Steps

For Indian users, the way forward is clear. Use registered platforms, stay tax compliant, and try safe tools such as crypto cards for overseas spending. Stay informed, secure, and compliant — India’s crypto market offers rewards only to those who follow the rules.