The Indian Crypto Landscape

Your Crypto Address Starts with an Indian Exchange

If you're reading this from India, chances are you'll buy your first crypto on an Indian exchange. And that's perfectly fine. But the Indian crypto landscape has some quirks you need to know about before you start.

Let's walk through what makes trading crypto in India different from the rest of the world.

Is Crypto Legal in India?

This is the first question everyone asks, and the answer is: yes, crypto is legal in India, but it's not legal tender.

What does that mean? You can legally buy, sell, and hold Bitcoin. But you can't walk into a kirana store and pay with it. The government treats crypto as a "Virtual Digital Asset" (VDA), not as currency.

Here's the regulatory timeline that matters:

• 2018: RBI banned banks from servicing crypto businesses. Panic ensued.

• March 2020: The Supreme Court overturned the ban. Crypto trading resumed.

• 2022: The Finance Act 2022 brought in a 30% tax on VDA gains from 1 April 2022 and 1% TDS on sales and swaps from 1 July 2022. This wasn't a ban. It was a signal that the government wanted its cut.

• March 2023: Crypto exchanges were brought under the PMLA, India's anti-money-laundering law. They must register with FIU-IND, verify their customers (KYC) and report suspicious transactions.

The bottom line: crypto is regulated, taxed, and legal. What it's not is regulated like stocks: there's no SEBI oversight, and there is no dedicated crypto law yet.

Setting Up on an Indian Exchange

Every Indian exchange requires KYC before you can trade. You'll need:

• PAN Card (mandatory, because this links your trades to your tax identity)

• Aadhaar Card (for identity verification)

• Bank account linked to the exchange

• Selfie/video verification (most exchanges do this automatically)

Depositing rupees is straightforward:

• UPI: Quick when it is available, but not every exchange offers it, and some banks block UPI payments to crypto platforms.

• Bank transfer (IMPS, NEFT or RTGS): The usual alternative when UPI is not available.

One gotcha: some banks still informally flag or block UPI payments to crypto exchanges. If your payment gets rejected, try a different bank account or contact your bank. This isn't a legal issue. It's individual banks being cautious.

The Tax Reality

This is the part nobody wants to hear but everyone needs to understand. These are the rules for FY 2025-26, and the Income-tax Act 2025, in force from 1 April 2026, keeps the same rates.

30% flat tax on gains: If you buy BTC at ₹20 lakh and sell at ₹25 lakh, you owe 30% of ₹5 lakh = ₹1.5 lakh in tax, plus 4% cess on that. No deduction except what you paid for the coin, and no offsetting losses from other coins. Each transaction is taxed independently.

1% TDS on sales: The exchange deducts this automatically. It is not an extra tax: it counts toward your tax when you file your ITR, and any excess is refunded. Until then, your working capital shrinks with every trade.

What this means in practice: Frequent trading becomes expensive. Holding longer does not lower the 30% rate, but fewer trades mean fewer fees and less money tied up in TDS. If you're going to trade actively, factor this in.

Pro tip: Record every trade from day one, in a spreadsheet or a crypto tax tool. Don't wait until March to sort this out.

Registered and unregistered exchanges

You'll hear about the big global exchanges. What matters in India is registration. Since March 2023, every crypto exchange that serves users in India, Indian or offshore, must register with FIU-IND (the Financial Intelligence Unit) under the anti-money-laundering law. In December 2023, FIU-IND issued notices to nine offshore exchanges that had not registered and asked for their websites to be blocked. Some offshore exchanges have registered since.

Here's why a registered exchange that takes rupees makes sense for beginners:

• INR on/off ramp: Indian exchanges let you deposit and withdraw in rupees directly. On global exchanges, you'd need to convert to USDT first (adding complexity and cost).

• Tax compliance: Indian exchanges auto-deduct TDS and provide tax reports. On foreign exchanges, you're responsible for tracking everything yourself.

• Legal standing: An exchange that serves Indian users without registering is operating outside Indian anti-money-laundering law, and its website can be blocked in India.

Start with a registered Indian exchange. Before you deposit anywhere, check that the platform is registered with FIU-IND.

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Quick Recap

• Crypto is legal in India, just taxed heavily (30% + 1% TDS)

• All exchanges require PAN + Aadhaar KYC

• UPI and bank transfers are the usual ways to deposit rupees

• Some banks may flag crypto transactions, this is informal, not legal

• Use an exchange registered with FIU-IND; Indian exchanges also handle TDS for you

• Track every transaction from day one for clean tax filing