India's crypto environment in 2025 is characterized by strict regulatory oversight, including a flat 30% tax on crypto gains, a 1% TDS on transfers, and robust AML/KYC compliance requirements for exchanges and users. While trading and owning crypto is permitted (though not as legal tender), users and businesses must navigate evolving regulations, heightened tax scrutiny, and security risks as the RBI pilots the Digital Rupee. The article provides a practical guide on buying, storing, and securing crypto in India, along with essential legal and tax considerations.
As of August 2025, India’s crypto landscape is a mix of tightening oversight and cautious adoption: the tax authority (CBDT) is actively soliciting industry input on a possible new “crypto code” and reviewing measures like the 1% TDS as it weighs changes to the regime.
The current tax framework still treats transfers of Virtual Digital Assets under Section 115BBH with a flat 30% rate and limited deductions, alongside a 1% TDS mechanism under Section 194S, so reporting and compliance remain a significant focus for traders and platforms.
Regulators are simultaneously enforcing AML/KYC obligations (FIU-IND/PMLA registration and suspicious-transaction reporting). At the same time, the RBI expands and pilots the Digital Rupee (e₹), leaving users and businesses to balance opportunity with material regulatory and tax risk.
This guide offers an easy-to-understand overview of cryptocurrency, including how to buy, store, and use it. It covers legal and tax considerations, security tips, risk management, and provides a simple checklist with resources.
TL;DR
Crypto is not legal tender in India, but owning, trading, and investing are allowed (subject to rules and supervision).
The Indian government taxes gains from Virtual Digital Assets (VDAs) at 30% and forbids most deductions or carrying forward losses under Section 115BBH (Finance Act, 2022).
A 1% TDS rule on transfers (Section 194S) applies to many VDA payments (CBDT issued implementation FAQs/guidelines).
Crypto service providers are under India’s AML / PMLA framework and must follow strengthened KYC and suspicious-transaction reporting (FIU-IND guidance).
RBI is rolling out the Digital Rupee (e₹) and continues to caution on private crypto risks; regulators (RBI, SEBI, MoF, FIU) are active—policy is evolving.
What are cryptocurrencies?
Cryptocurrencies are digital tokens that rely on cryptographic technology for security. They operate on blockchain technology, which is a decentralized ledger distributed across many computers, ensuring transparency and security.
Cryptocurrencies serve various purposes: some are used primarily as a store of value, like Bitcoin, similar to digital gold; others, like Ethereum, enable programmable smart contracts that facilitate complex transactions and applications beyond simple transfers.
There are also stablecoins, which are cryptocurrencies pegged to stable assets such as fiat currencies (e.g., USD) to minimize volatility, and NFTs (non-fungible tokens), which are unique digital assets often used to represent ownership of art, music, or other distinctive items.
Ownership and control of cryptocurrencies depend on private keys, secret cryptographic codes that grant access to the tokens. If you control the private key, you control the cryptocurrencies.
While cryptocurrencies offer innovative financial opportunities, they also come with risks. These include
high volatility, which can lead to rapid changes in value;
smart contract bugs that can be exploited;
scams and fraudulent schemes like rug pulls;
regulatory uncertainties that can affect their legality and usage;
and the possibility of exchange insolvency, where a cryptocurrency exchange may fail and jeopardize users' funds.
Is crypto legal in India?
The blanket ban on cryptocurrency banking was effectively lifted. Specifically, the Supreme Court struck down the 2018 RBI banking restriction in March 2020, allowing banking access for cryptocurrency exchanges to resume.
Despite this progress, regulators remain cautious in their approach to cryptocurrency oversight. The government has not enacted a comprehensive, all-encompassing “crypto bill."
Instead, the existing policy framework is piecemeal, addressing specific issues such as taxation, anti-money laundering (AML) obligations, and registration with the Financial Intelligence Unit (FIU).
Future legislation is expected to clarify and expand the cryptocurrency regulatory environment.
Taxes & reporting: essentials everyone must know
From FY 2022–23, income from transferring Virtual Digital Assets (VDAs) is taxed at a flat rate of 30% under the Finance Act, 2022. You can't claim most deductions other than the initial cost, and losses usually can't be offset against other income or carried forward.
TDS (Section 194S): The payer must deduct 1% tax on many VDA transfers. The CBDT issued rules and guidelines starting July 1, 2022. Usually, exchanges handle this TDS automatically. In P2P or OTC trades, you might still need to account for it yourself.
Practical: Keep good records of your trades and exports, including date, time, currency pair, INR value, exchange, transaction ID, and fees. Use CSV files from exchanges and a crypto tracker for proof, as auditors and tax officers will require it.
Filing: Crypto income reported in ITR; exchanges provide Form 26AS entries for TDS. If in doubt, consult a CA experienced with VDAs.
KYC/AML compliance in India
Crypto exchanges and service providers are reporting entities under the PMLA and FIU-IND guidelines. They must enforce stronger KYC, conduct periodic redos of KYC, report suspicious transactions, and register with FIU-IND. Expect stricter checks and possible account freezes for suspicious behavior.
Where to buy crypto in India
Major domestic and international exchanges operate for Indian users, including CoinDCX, CoinSwitch, WazirX, ZebPay, and Binance. Many of these platforms require FIU registration or comply with local regulations. When choosing an exchange, consider factors such as security track record, INR deposit and withdrawal options, fees, coin listings, and the ease of KYC procedures.
It's advisable to compare fees and withdrawal limits before transferring large sums. Payment methods available include UPI, IMPS, NEFT through exchange partners, bank transfers, and occasionally P2P fiat rails. Exchanges generally automate KYC and TDS compliance for most users. OTC and P2P options can be helpful for large blocks of trading, but it's essential to verify the counterparty, conduct checks, and ensure proper tax documentation.
Self-custody: beginner to advanced
More detailed explanations for each crypto custody level and best practices:
Beginner (Custodial): Keeping your crypto on an exchange like Binance offers convenience for trading and accessing fiat currency (USD, EUR, etc.). Pros include easy trading, quick access to fiat conversions, and low initial friction. Cons involve reliance on the exchange's security. If the exchange is hacked, frozen, or goes insolvent, your assets could be at risk.
Intermediate (Non-custodial software wallets): Applications like MetaMask allow you to control your private keys, giving you full ownership of your crypto assets. They are suitable for users who are comfortable managing keys. For larger amounts, it's safer to use hardware wallets, which store keys offline, reducing exposure to online threats.
Advanced (Hardware & Cold Storage): Hardware wallets such as Tangem store private keys securely offline, providing real cold storage.
Security checklist (do this now)
Move large holdings off exchanges into hardware/cold wallets.
Use unique, strong passphrases and a password manager.
Enable 2FA on exchange accounts (use authenticator apps, not SMS if possible).
Keep a signed, offline copy of seed phrases in a safe (NOT digital).
Check smart contract addresses carefully; do small test sends first.
For DeFi: limit allowance approvals, use timelocks, and audited contracts for larger allocations.
Practical checklist (for a beginner who wants to start today)
Pick a regulated/reputable exchange (check KYC & fee schedule).
Complete KYC and secure your account (authenticator, email hardening).
Start small — buy a small amount, practice withdrawals to your own wallet.
Move long-term holdings to hardware/cold wallet.
Keep records of every trade and fiat deposit for taxes.
If trading actively or running bots, consult a CA for correct tax treatment and compliance.
Short legal & tax resource list (quick links you can read now)
Our recommended platform for keeping up with crypto regulations and news in India — r/CryptoIndia/
Section 115BBH (Tax on income from Virtual Digital Assets) — Income Tax Act text / Govt source. (Income Tax India)
CBDT Guidelines / FAQs on Section 194S (TDS on transfer of VDAs). (Abcaus)
FIU-IND AML / CFT Guidelines for VDA service providers (PMLA compliance). (fiuindia.gov.in)
RBI press release/concept note on Digital Rupee (e₹) and pilot status. (Press Information Bureau)
