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India has moved from a tax-focused approach to a compliance-driven framework, strengthening reporting, AML monitoring, and penalties
Out of Rs. 51,252 crore FY25 trading volume, 72.66% occurred offshore, highlighting liquidity challenges due to high taxation and the 1% TDS structure
India remains the top global crypto adopter with over 20 million users and $4.5 billion in holdings
India’s crypto policy shifted from “tax-first ambiguity” to “tax-plus-reporting enforcement.” The legal core has not changed: crypto is still not legal tender, there is still no dedicated crypto law, and official messaging still treats private crypto as risky and largely outside the regulated financial mainstream. But the supervisory perimeter has become much tighter.
India now relies on a three-layer model: punitive taxation, anti-money-laundering registration and surveillance through the Financial Intelligence Unit-India, and widening tax-information reporting under the Income-tax framework.
India ranked first globally in crypto adoption in the 2025 Chainalysis index, and CoinSwitch stated it had 20 million users in early 2025. A Reuters-reviewed government document in September 2025 said Indians held about $4.5 billion in crypto assets.
KoinX reported that 72.66% of India’s FY25 crypto trading volume happened on offshore exchanges, out of a total Rs. 51,252 crore. That implies roughly Rs. 37,240 crore offshore and only Rs. 14,012 crore onshore. Budget 2026 did not cut the headline crypto tax burden.
The familiar regime remains: 30% tax on transfer income from virtual digital assets, 1% TDS on transfers, no loss set-off, and only the cost of acquisition is clearly deductible.
What changed in 2026 was enforcement. The Finance Bill added a Rs. 200-per-day penalty for failing to furnish crypto-transaction statements and a Rs. 50,000 penalty for inaccurate reporting or failed due diligence. Then, on 5 March 2026, India expanded its financial-account reporting rules to include relevant crypto-assets, CBDCs, and certain electronic money products.
Private crypto is not banned, but it is not recognized as legal tender, and the government still warns that crypto products and NFTs are unregulated and may leave users with no regulatory recourse for losses. At the same time, exchanges can legally serve Indian users if they register with FIU-IND and comply with anti-money-laundering obligations.
Reuters reported in February 2026 that India still “does not regulate” cryptocurrencies in a sectoral sense, even though exchanges such as Binance, CoinDCX, Coinbase, and Zebpay operate after registration with a government agency.
The table summarizes how policy evolved.
The original 2022 framework taxes income from the transfer of a VDA at 30%, disallows most deductions other than acquisition cost, bars the set-off of losses against other income, bars the carry-forward of VDA losses, and imposes 1% TDS on transfers.
The 2024 budget explicitly said there would be no change to TDS on VDAs, even while other TDS rates were rationalized. Budget 2026 did not change those core tax rates. Instead, it tightened compliance around reporting.
The Finance Bill substituted section 446 to impose Rs. 200 per day for failing to furnish a required crypto-transaction statement and Rs. 50,000 for inaccurate information or due diligence failures, with effect from 1 April 2026.
The next step came through the 5 March 2026 gazette notification. Those rules brought “relevant crypto-assets” into the financial-account reporting framework and also identified CBDCs and certain electronic-money products inside the same widened reporting perimeter. In simple terms, India is adapting legacy tax-information architecture to digital assets.
India’s AML base was laid in March 2023, when VDA service providers were brought under the AML-CFT framework and FIU guidelines took effect. The rule is activity-based, not dependent on physical presence in India.
By 1 October 2025, the government said 50 VDA service providers had registered with FIU-IND, yet it simultaneously issued notices to 25 offshore platforms still serving Indian users without compliance.
In 2026, onboarding rules tightened. FIU guidance reported on January 8 required live-selfie verification with liveliness checks, capture of latitude-longitude, timestamp, and IP at onboarding, “penny-drop” bank verification, PAN plus a second identity document, six-month KYC refresh for high-risk users, annual refresh for others, and record retention for at least five years.
FIU-IND fined Binance Rs. 18.82 crore in June 2024 and Bybit Rs. 9.27 crore in January 2025. Earlier parliamentary disclosures also showed crypto-linked ED action totaling Rs. 936 crore attached, seized, or frozen under PMLA as of January 2023, along with Rs. 289.28 crore seized under FEMA and a show-cause notice to WazirX involving Rs. 2,790 crore worth of transactions.
In late 2025, Governor Sanjay Malhotra said crypto and stablecoins carry “huge risk,” while Deputy Governor T. Rabi Sankar said stablecoins raise concerns for monetary stability, fiscal policy, banking intermediation, and systemic resilience, and argued that CBDCs are “inherently superior.”
Reuters also reported that the RBI worries that widespread stablecoin use could weaken payment systems such as UPI. That stance is paired with a positive CBDC strategy. The RBI states that the eRs. is legal tender under the RBI Act. Reuters reported about 7 million CBDC users by October 2025, and the central bank launched a retail CBDC sandbox the same month to let fintechs test products.
India ranked first in the 2025 Chainalysis Global Adoption Index and also ranked first in retail, total centralized, DeFi, and institutional centralized service value received.
Seven of the top ten centers driving Indian crypto activity in 2024 were lower-tier cities, while CoinSwitch said it had 20 million users. A statistic-based projection cited by Forbes Advisor India estimated 107.3 million crypto users in India by 2025.
The domestic exchange volumes fell 81% in the first four months after the 1% TDS began, and by March 2024, 88% of the former domestic volume was lost. It also estimated domestic assets under control were down 53%, deposits down almost 92%, withdrawals down 83%, and profitable users down 96%.
Indian-held exchange assets worldwide stand at around $13.38 billion, with only 9.02% on compliant domestic platforms.
Reportedly, FY25 TDS collection reached around Rs. 511.8 crore, up from Rs. 362.7 crore in FY24, suggesting compliance data improved even as liquidity migrated.
As of 18 April 2026, the global tracked stablecoin market cap was about $320.5 billion on DefiLlama, and Reuters separately described the global stablecoin market as above $300 billion in late 2025. India does not publish an official country-level stablecoin supply series. That absence matters because the
RBI’s macro concern is really about dollarization and payments substitution, not just trading speculation.
India should reduce the 1% TDS on crypto, introduce a limited licensing framework for platforms, and clearly separate stablecoins from speculative assets. Key metrics to track include onshore vs offshore trading volume, FIU-registered entities, and the gap between eRs adoption and stablecoin usage.
Crypto trading remains legal but unregulated, with a 30% tax and 1% TDS still in place, alongside new reporting penalties in Budget 2026. Despite this, most Indian trading activity continues offshore due to tax and liquidity challenges.
1. Is crypto legal in India in 2026?
Crypto is not banned, but it is not legal tender and lacks a dedicated law. Exchanges can operate if registered with FIU-IND and compliant with AML rules.
2. What taxes apply to crypto in India?
A flat 30% tax on VDA income applies along with 1% TDS on transactions, with no loss set-off and limited deductions allowed.
3. What changed in Budget 2026 for crypto?
No tax relief was provided, but new penalties were introduced, Rs. 200 per day for non-reporting and Rs. 50,000 for inaccurate disclosures.
4. Why are Indian traders using offshore exchanges?
High taxation and liquidity constraints on domestic platforms have pushed nearly 73% of trading volume to offshore exchanges.
5. What is the RBI’s stance on crypto and stablecoins?
The RBI views crypto and stablecoins as risks to monetary stability and promotes the digital rupee (eRs) as a safer alternative for payments.
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