By Erick The recent news about the Coin DCX breach (see TWITI #30 of 2025) got me thinking that there is still a lot of confusion and uncertainty about what’s legal and what’s not when it comes to buying and selling crypto in India. This post has all you need to know about what you can and cannot do about crypto in India.
Millions of Indians are trading crypto, but the legal and tax landscape can seem overwhelming. Let’s break it down in simple terms so you can make informed decisions.
The Big Question: Is Crypto Legal in India?
Yes, it absolutely is! Despite what you might have heard, buying and selling cryptocurrency is completely legal in India as of 2025. However, there’s an important catch – crypto is not considered “legal tender”. This means you can trade it like any other asset (think stocks or gold), but you can’t use Bitcoin to buy your morning chai or pay your electricity bill.
The government has classified cryptocurrencies as “Virtual Digital Assets” (VDAs), which basically means they’re treated as digital investments, not currency.
What You Can and Cannot Do
✅ What’s Allowed:
- Buy, sell, and hold cryptocurrencies
- Trade on registered Indian exchanges
- Invest for long-term wealth building
- Transfer crypto between wallets
❌ What’s Not Allowed:
- Using crypto to pay for goods or services
- Trading on unregistered foreign platforms
- Avoiding taxes (obviously!)
The Tax Reality – What Will It Cost You?
Here’s where things get tricky. The Indian government has implemented some of the strictest crypto tax rules in the world. Let me break it down:
Income Tax: The Big One
Every rupee you make from crypto is taxed at 30% (plus 4% cess). It doesn’t matter if you held the crypto for one day or one year – the rate is flat 30%. This is higher than most other investments!
Example: If you buy Bitcoin for ₹1,00,000 and sell it for ₹1,50,000, your profit is ₹50,000. You’ll pay ₹15,000 (30%) plus cess as tax.
The Harsh Reality:
- No deductions allowed – You can’t deduct trading fees, electricity costs, or any other expenses
- Losses can’t be offset – If you lose money on one crypto, you can’t use that loss to reduce tax on profits from another
- Losses can’t be carried forward – Unlike other investments, crypto losses are gone forever for tax purposes.
TDS: Tax Deducted at Source
Here’s another layer: 1% TDS is deducted on crypto transactions above certain limits:
- ₹50,000 for individuals (if you’re not running a business)
- ₹10,000 for businesses and professionals
Most Indian exchanges automatically handle this, but if you’re trading peer-to-peer or on international platforms, you need to handle TDS yourself.
GST: The Service Tax
18% GST applies to exchange fees and services – not on the crypto purchase itself, but on the fees you pay to the exchange. So if an exchange charges you ₹100 as trading fees, you’ll actually pay ₹118.
Choosing the Right Platform
Stick to Registered Exchanges
This is crucial: only use exchanges registered with FIU-IND (Financial Intelligence Unit). Unregistered platforms can be blocked anytime, and you might lose access to your funds.
Popular registered Indian exchanges include (not sponsored):
- CoinDCX
- CoinSwitch
- Mudrex
- ZebPay
What About International Exchanges?
Some international platforms like Bybit operate in India after obtaining proper registration. However, they now charge 18% GST on their service fees, making them potentially more expensive.
The Compliance Checklist
KYC is Mandatory
Every legitimate platform will ask for:
- Aadhaar card
- PAN card
- Bank account details
- Address proof
Don’t try to skip this – it’s the law, and platforms are strictly monitored.
Keep Detailed Records
This cannot be stressed enough: maintain records of every transaction. You’ll need:
- Purchase dates and amounts
- Sale dates and amounts
- Exchange fees paid
- Wallet addresses used
The tax department can ask for these anytime, and with new reporting requirements, they’re getting more data than ever.
Smart Tips for Indian Crypto Investors (NOT FINANCIAL ADVICE!!!)
1. Start Small
Given the 30% tax rate, crypto should be a small part of your portfolio. Don’t put in money you can’t afford to lose.
2. Plan for Taxes
Set aside 30% of your profits immediately. Many people get shocked when tax time comes.
3. Consider the Long Game
With such high taxes, frequent trading doesn’t make much sense. Consider a long-term investment approach.
4. Stay Updated
Crypto regulations are evolving rapidly. The government introduced new monitoring rules in Budget 2025, and more changes are expected.
Recent Changes You Should Know
Budget 2025 Updates
The government has tightened the screws further:
- Enhanced transaction monitoring: Exchanges must report more details to tax authorities
- Expanded VDA definition: More types of digital assets now fall under the tax net
- Automatic information sharing: Your crypto transactions might be shared with international tax authorities
FIU Registration Impact
All major platforms now have proper registration, which is good for security but means stricter compliance and monitoring.
The Bottom Line
Cryptocurrency trading is legal and growing rapidly in India – we now have over 107 million crypto users! However, the tax implications are significant, and compliance is non-negotiable.
Before you start:
- Understand the 30% tax reality
- Choose only registered, compliant platforms
- Set up proper record-keeping
- Start with amounts you’re comfortable paying 30% tax on
The crypto market in India is projected to reach ₹6.4 billion by end of 2025, showing that despite the strict rules, Indians are embracing digital assets. Just make sure you’re doing it the right way – legally and with full awareness of the costs involved.
Remember: This is a rapidly evolving space. While crypto is legal and the framework is clear, always consult with a tax professional for your specific situation, especially if you’re trading large amounts.
Ready to start your crypto journey? Choose a registered exchange, complete your KYC, start small, and always keep taxes in mind. Or, don’t?
[…] Btw, remember that using crypto as legal tender is still banned in India. See this post. […]