Is Crypto Legal in India? Parliament Just Spent a Year Not Deciding

A year of hearings ended this week with one sentence worth reading twice#

On 16 September the Parliamentary Standing Committee on Finance finished the last evidence session of a review it began in September 2025. Twelve months, testimony from the Reserve Bank of India, the Central Board of Direct Taxes, the Financial Intelligence Unit and the exchanges themselves. At the end of it, the committee's chairman, Cuttack MP Bhartruhari Mahtab, summed up the state of Indian crypto policy like this: the government "is not accepting virtual digital assets, doesn't want to regulate it, but not regulating it also leaves greater scope for different types of indulgences."

Not accepted, not regulated, and not banned either. That is the honest answer to the question in the headline, and it has been the answer since the tax framework arrived in 2022. The committee is now waiting on a written response from the government before it files its report. Meanwhile roughly 39 million Indians hold about $2.1 billion in digital assets, according to figures the government itself was working with in May 2026. Chainalysis has ranked India first in the world on its grassroots crypto adoption index.

A very large number of people, with real money, doing something the law neither blesses nor forbids.

Legal, illegal, unregulated: three words that are not the same thing#

Most of the confusion around this topic comes from collapsing three separate ideas into one.

Legal tender is money a creditor must accept in settlement of a debt. In India that is the rupee alone, in note, coin and now digital form. The e-rupee the RBI issues is legal tender by law because the RBI Act was amended in 2022 to make it so. Bitcoin never has been, and no shopkeeper is obliged to take it.

Something is illegal when a statute prohibits it and attaches a penalty. No Indian law prohibits buying, holding or selling crypto. A bill to ban private cryptocurrencies has appeared on Parliament's legislative agenda repeatedly since 2021 and has never once been introduced.

Unregulated is different again. It means no sector regulator writes the rules, licenses the firms or takes your complaint, and that is exactly where crypto sits. SEBI does not oversee it the way it oversees your mutual fund. The RBI does not supervise exchanges the way it supervises your bank. The government's own press release on the subject says plainly that "crypto products and NFTs are unregulated and can be highly risky".

One piece of history explains how we got here. In April 2018 the RBI told banks to stop serving anyone dealing in virtual currencies, cutting the industry off from the banking system. In Internet and Mobile Association of India v Reserve Bank of India, decided on 4 March 2020, the Supreme Court struck that circular down as disproportionate, since the RBI had produced no evidence that regulated banks had actually suffered harm. Trading resumed. The legal vacuum the judgment exposed was never filled.

What is permitted, activity by activity#

Here is where each common activity stands as of September 2026.

The middle rows carry the practical sting. Registration with the Financial Intelligence Unit under the Prevention of Money Laundering Act became compulsory for virtual digital asset service providers in March 2023, and the obligation follows the customer rather than the office. On 1 October 2025 the finance ministry confirmed that FIU-IND had issued non-compliance notices to 25 offshore platforms, among them Huione, Paxful, BitMEX, LBank and CEX.IO, and had sought URL blocking under the Information Technology Act. Fifty providers had registered by that date.

If your app is on the wrong side of that line, your rupees are sitting with a firm the Indian state is actively trying to block.

The tax code recognises what the rule book will not#

Here is the oddity. The Income-tax Act has a detailed and unforgiving framework for crypto. The financial rule book has nothing at all.

The Income Tax Department's own guidance sets it out. Income from transferring a virtual digital asset is taxed at a flat 30% plus surcharge and cess. The only deduction allowed is the cost of acquisition, so brokerage, internet, electricity and advisory fees are all disallowed. Losses cannot be set off against anything, not even a gain on another coin, and cannot be carried forward. There is 1% TDS on the transfer itself under Section 194S, with a threshold of ₹50,000 a year for individuals below the audit limits and ₹10,000 for everyone else. From 1 April 2026 these provisions sit in the Income-tax Act, 2025, renumbered as Section 194 for the 30% rate and Section 393(1) for the TDS, with the substance unchanged.

The Union Budget of 1 February 2026 left the rates alone and added something else instead: Section 509 requires prescribed reporting entities to file statements of crypto-asset transactions, with penalties under Section 446 of ₹200 a day for late filing and ₹50,000 for information that is wrong and not corrected. India has also committed to the OECD's Crypto-Asset Reporting Framework from April 2027, which will bring in data on Indian residents from foreign platforms.

Enforcement is not theoretical. The CBDT's NUDGE campaign cross-matched exchange data against filed returns and issued more than 44,000 communications, identifying roughly ₹888.82 crore of undisclosed VDA income, with reassessment notices reaching back to FY 2021-22. The department told the parliamentary panel that of about 645,000 people who transacted in crypto in the year to March 2023, fewer than a quarter declared it.

Some traders read the tax law as a backdoor licence. It is not. Taxing an income says nothing about whether the activity behind it is protected.

Why the central bank keeps saying no#

The RBI's position has not softened. Governor Sanjay Malhotra, asked about the Supreme Court's remarks at the monetary policy briefing on 6 June 2025, said: "We are concerned about crypto because that can hamper financial stability and monetary policy." The Financial Stability Report of 31 December 2025 went further, holding that "central bank money must remain the ultimate settlement asset" and that risks from stablecoins "outweigh their purported benefits". Its specific worry is that stablecoins let money cross borders outside the foreign exchange system, which would make India's capital controls leaky.

In July 2026, according to government documents seen by Reuters, the RBI told the standing committee it still favours a framework leaning towards prohibition, and wants banks kept out of crypto exposure entirely. Its objection to dollar-pegged stablecoins is about seigniorage and monetary sovereignty: if Indians save in tokenised dollars, the central bank loses some control over its own currency.

That view has a serious counterweight inside the state. In May 2025 a Supreme Court bench of Justices Surya Kant, Dipankar Datta and Vijay Bishnoi called the existing laws "completely obsolete" and pressed the government for a policy. Justice Kant recalled being told, when the court asked for a regulatory mechanism, that the government was "watching" international conditions. The long-promised discussion paper from the Department of Economic Affairs, in the works since 2024, still has not been published.

My own reading, and it is a reading rather than a finding: the deadlock is between a central bank that wants prohibition and a finance ministry that has already built a revenue stream it would have to dismantle. Neither wins, so nothing moves.

What the grey zone actually costs#

Policy paralysis has a price, and most of it has landed on ordinary users.

The money left first. Research compiled in the TIOL-TKF report on digital asset taxation puts 91.5% of Indian trading volume on offshore platforms by October 2025, with roughly ₹4.88 lakh crore traded abroad in the twelve months to that date and about ₹11,000 crore of TDS never collected since the levy began in July 2022. These are industry estimates, not official statistics, and should be read as such. The direction they point is hard to dispute: the 1% TDS made domestic platforms expensive, and users went where it was not deducted.

Protection never followed it out. When an Indian trader on an unregistered offshore app loses access to funds, there is no regulator to complain to, no deposit insurance, no equivalent of SEBI's SCORES portal. The July 2024 WazirX breach showed what that means even on a domestic platform: about $234 million gone, and the restructuring that will repay users went through a Singapore court, not an Indian regulator.

For a first-time buyer the practical position is narrow but clear. Nothing stops you. Use a platform registered with FIU-IND, the only compliance marker India currently issues. Expect 1% withheld on every sale, 30% on any gain with no offset for losses, and declare all of it in Schedule VDA. Then accept that if the counterparty fails, you are on your own.

Key takeaways#

1. Crypto is not illegal in India and not legal tender. There is no dedicated statute either permitting or prohibiting it, and none has been introduced since the idea was first listed in 2021.
2. The parliamentary standing committee closed a year of hearings on 16 September 2026 and will report only after the government replies in writing. Nothing changes until then.
3. Tax exists where regulation does not: 30% on gains, no deductions beyond cost, no loss set-off, 1% TDS, and reporting duties with penalties from 1 April 2026.
4. FIU-IND registration under the PMLA is the only licence-like status in the system, and it binds offshore platforms serving Indians just as it binds domestic ones.
5. There is no financial-sector grievance mechanism. If an exchange fails or an app vanishes, the remedy is the police and the courts, not a regulator.

Frequently asked questions#

Can I be arrested for owning bitcoin? Not for owning it. No Indian statute makes holding or trading crypto an offence. Using it in fraud, money laundering or evasion is punishable under the ordinary criminal and tax laws, as it would be with cash.

Is my money safe on an FIU-registered exchange? Safer on the money-laundering compliance side, which is all that registration covers. It is not a solvency licence, not deposit insurance and not a guarantee of custody. Registration says the platform reports to the FIU, nothing more.

Do I have to pay tax if I never converted to rupees? Yes. Tax attaches to the transfer of a virtual digital asset. Swapping one coin for another is a transfer, and the gain is computed in rupee terms on that date.

Can I set off a crypto loss against a crypto gain? No. The provision bars set-off between digital assets and bars carry-forward. Lose ₹1 lakh on one coin and make ₹1 lakh on another in the same year, and you still owe 30% on the gain.

What happens if I used an offshore exchange? Your tax liability is identical. The 1% TDS was probably never deducted, which means it falls on you to compute and pay. From April 2027 the OECD reporting framework is expected to give the department data from foreign platforms directly.

Is the digital rupee the same thing as crypto? No. The e-rupee is a liability of the RBI and legal tender. Bitcoin is a private asset with no issuer and no backing.

When will India have a crypto law? No date has been announced. The standing committee's report is the next step and is expected once the government responds; a report is a recommendation, not legislation.

Glossary#

Virtual digital asset (VDA). The tax law's term for crypto tokens and notified NFTs. It excludes the rupee, foreign currency and the central bank's digital rupee.

Legal tender. Money a creditor must accept in settlement of a debt. In India, only the rupee, including the e-rupee.

FIU-IND. The Financial Intelligence Unit, the agency under the finance ministry that receives suspicious transaction reports. Crypto service providers must register with it as reporting entities.

PMLA. The Prevention of Money Laundering Act, 2002, which since March 2023 covers businesses dealing in virtual digital assets.

TDS. Tax deducted at source. For crypto, 1% of the sale consideration, withheld by the buyer or the platform and credited against your final bill.

Schedule VDA. The part of the income tax return where crypto transactions are declared, transaction by transaction.

Stablecoin. A token designed to hold a fixed value against a currency, usually the US dollar. The RBI's main objection is that widespread use would shift savings out of the rupee.

CARF. The OECD's Crypto-Asset Reporting Framework, an automatic exchange of crypto account information between tax authorities, which India plans to adopt from April 2027.

References#

1. ANI, Finance panel seeks government response on virtual digital asset grey areas, 16 September 2026
2. Press Information Bureau, Ministry of Finance, FIU-IND issues notices to 25 offshore VDA service providers under Section 13 of the PMLA, 1 October 2025
3. Press Information Bureau, Central Bank Digital Currency: e₹-R is a digital token representing legal tender
4. Income Tax Department, Taxation of virtual digital assets
5. Income Tax Department, Schedule VDA
6. Supreme Court of India, Internet and Mobile Association of India v Reserve Bank of India, 4 March 2020
7. Reserve Bank of India, Financial Stability Report archive; coverage of the December 2025 edition in Business Standard, RBI flags stablecoin risks, urges countries to prioritise CBDCs, 31 December 2025
8. Business Standard, RBI Governor flags crypto concerns, says it may hamper financial stability, 6 June 2025
9. Business Standard, Supreme Court calls crypto laws obsolete, urges government to act, 30 May 2025
10. CoinDesk, Reserve Bank of India still favours crypto prohibition to curtail tax evasion, 8 July 2026, reporting on Reuters
11. CoinDesk, Budget 2026 keeps crypto taxes and TDS unchanged, adds penalty for lapses, 2 February 2026
12. TDSMAN, TDS on virtual digital assets under Section 393(1) of the Income-tax Act, 2025, May 2026
13. Crypto Briefing, India's income tax department issues 44,000 VDA notices, 14 June 2026
14. Chainalysis, 2025 Global Crypto Adoption Index, 2 September 2025
15. KoinX, India crypto offshore trading statistics, compiling the TIOL-TKF Report on Taxation of Digital Assets, November 2025
16. The Crypto Times, "Government is not accepting VDAs, not regulating either", 16 September 2026
17. CoinDesk, WazirX restructuring cleared in Singapore after the $230m hack, 13 October 2025
18. Google Ads search volumes for India, retrieved through DataForSEO, 18 September 2026

This article is journalism, not investment, tax or legal advice. Crypto assets are unregulated in India and can lose their entire value. Rules are under active review. Verify the current position and consult a qualified professional before acting.