India Crypto Regulation 2026: 30% Tax, 1% TDS, FIU-IND and RBI Stance

A diamond trader in Surat buys ₹2 lakh of bitcoin on a domestic exchange in January and sells it in June for ₹3 lakh. On the same app he also loses ₹50,000 on an altcoin. Under Indian tax law he owes tax on the full ₹1 lakh gain, cannot subtract the loss, and has already had ₹3,000 withheld at source on the sale. India has not passed a crypto law, yet that trade is tightly regulated. That is India in 2026: no statute that says what crypto is, but a tax code and an anti-money-laundering regime that treat it very seriously.

This piece sets out the rules that actually bind Indian users and platforms today, who enforces them, where the Reserve Bank of India stands, and why the long-promised government discussion paper on crypto has still not appeared. We take no side on whether India should ban, license or encourage crypto. The aim is to describe the system as it is.

Legal, taxed and unregulated: the three-word summary

Crypto is not illegal in India. The RBI's April 2018 circular barring banks from serving crypto businesses was struck down by the Supreme Court in IAMAI v. RBI on 4 March 2020. Since then no law has replaced it. There is no licensing regime for exchanges, no consumer-protection framework specific to crypto, and no recognition of crypto as money or a security.

What exists instead are two working regimes bolted on from outside. The Income-tax Act defines "virtual digital assets" and taxes them harshly. The Prevention of Money Laundering Act (PMLA) treats platforms as reporting entities. The Finance Ministry's own public line, repeated in a September 2026 statement, is that crypto products and NFTs are unregulated and can be highly risky.

The tax regime: 30% flat, no losses, 1% at source

The Finance Act 2022 created the VDA tax rules that still apply. Gains from transferring a VDA are taxed at a flat 30%, plus surcharge where applicable and a 4% cess, which takes the minimum effective rate to 31.2%. Only the cost of acquisition is deductible, so exchange fees, network fees and advisory charges are not. Losses on one VDA cannot be set off against gains on another, or against any other income, and cannot be carried forward.

On top of that sits a 1% tax deducted at source on the consideration for a transfer. The annual threshold below which TDS does not apply is ₹50,000 for specified persons and ₹10,000 for others, according to a guide to the rules under the new Act. Domestic exchanges deduct and deposit it. The TDS is credited against the final liability, but it ties up working capital for active traders and leaves a paper trail on every sale.

These provisions, long known by their section numbers 115BBH and 194S, carry over into the Income-tax Act, 2025 that took effect on 1 April 2026, with renumbered sections and the same substance. Budget 2025 also widened the definition of VDA to cover crypto-assets that rely on cryptographic security and distributed ledgers, made reporting by platforms mandatory, and brought undisclosed VDAs into block assessment after searches, as Business Standard reported. From 1 April 2026, reporting entities must file crypto transaction statements, with a penalty of ₹200 a day for not filing and ₹50,000 for inaccurate information.

Individuals report each transaction in Schedule VDA of their return. For NRIs, the same rules apply to Indian-source gains; our guide on NRI tax on money sent to India covers the wider picture, and our crypto tax comparison by country shows how unusual the no-loss-offset rule is.

A worked example: the Surat trader's bill

Return to the trader from the opening. Assume he is a resident individual with other income below the surcharge threshold, and that he trades on an Indian exchange charging a 0.2% fee per trade.

1. Bitcoin gain. Bought for ₹2,00,000, sold for ₹3,00,000. Taxable gain: ₹1,00,000. Fees on the buy and sell (₹400 and ₹600) are not deductible.
2. Altcoin loss. ₹50,000 loss. It cannot reduce the bitcoin gain and cannot be carried forward.
3. Tax on the gain. 30% of ₹1,00,000 is ₹30,000. Add 4% cess (₹1,200). Total: ₹31,200.
4. TDS already withheld. 1% of the ₹3,00,000 sale, so ₹3,000, plus 1% on the altcoin sale proceeds. These are credited against the ₹31,200 when he files.
5. GST. 18% GST on the ₹1,000 of bitcoin trading fees adds ₹180.

His economic result across both trades is a net gain of ₹50,000. His tax bill is ₹31,200, or about 62% of what he actually made. That gap, created by the no-offset rule, is the single biggest reason Indian traders have been drawn to offshore platforms that do not deduct TDS. This is a simplified illustration, not tax advice; individual circumstances vary, and readers should consult a chartered accountant.

India regulates crypto mainly through the tax return and the suspicious transaction report.

FIU-IND and PMLA: registration is mandatory, including offshore

In March 2023 the government brought VDA service providers under PMLA. Platforms that exchange VDAs for fiat currency or transfer VDAs for customers are reporting entities and must register with the Financial Intelligence Unit-India, keep records, run KYC and file suspicious transaction reports. The obligation is activity-based: it applies to any platform serving Indian users, regardless of where it is located.

FIU-IND's annual report for 2024-25 counted 49 registered VDA service providers as of 31 March 2025, 45 onshore and 4 offshore, and penalties of about ₹28 crore on non-compliant platforms over the year, including a ₹9.27 crore fine on one offshore provider, according to a summary of the report. The unit has escalated since. In October 2025 it issued notices to 25 offshore platforms, and on 9 September 2026 it ordered 15 more, including Bitunix, DigiFinex, Pionex and WhiteBIT, to take down apps and URLs serving Indian users.

Our view: FIU-IND has become India's de facto crypto regulator by default. Registration is the closest thing to a licence that exists, and the takedown power gives it real teeth. But it is an AML supervisor, not a market regulator. It does not police custody, solvency, listing standards or market abuse, which leaves users of a failed platform with few remedies outside court.

Where the RBI stands

The RBI has been the most consistent sceptic in Indian policy. Governor Sanjay Malhotra said in November 2025 that the central bank takes a very cautious approach to crypto, adding that the government will have the final say, Cointelegraph reported. He also brushed aside pressure to respond to US stablecoin policy by pointing to India's 24/7 payment systems. UPI now handles about 802 million payments a day as of September 2026, which makes that argument harder to dismiss.

The RBI's preferred digital money is its own. The e-rupee has processed more than 150 million transactions worth over ₹34,000 crore since its December 2022 launch, according to figures cited in Parliament, though daily volumes have fallen from a peak near one million in December 2023 to roughly 100,000. For the details see our digital rupee explainer and our e-rupee vs UPI comparison.

Reports in July 2026 citing internal government submissions said the RBI supports banning private cryptocurrencies, on the argument that formal regulation would lend them legitimacy. That is consistent with its stance since 2018, and it puts the RBI at odds with parts of government that have floated a stablecoin framework.

The discussion paper that keeps slipping

The Department of Economic Affairs has been drafting a crypto discussion paper since 2022. In May 2025 it was described as in its final drafting stages. It still has not been published, and reporting by The Crypto Times counts at least five occasions on which it was reportedly shelved, with RBI opposition cited as the main reason.

Parliament has meanwhile moved on its own. The Lok Sabha Standing Committee on Finance, chaired by Bhartruhari Mahtab, has taken evidence on a study titled "A Study on Virtual Digital Assets (VDAs) and Way Forward" from the RBI, CBDT, FIU-IND, ICAI, IFSCA, the Ministry of Corporate Affairs and several exchanges. On 23 July 2026, its 36th report, on the Securities Markets Code, 2025, recommended an interim self-regulatory framework for crypto overseen by SEBI or the RBI. A DEA hearing set for 27 August 2026 was cancelled eight days before without a stated reason.

The scale of what is at stake is not small. India topped the Chainalysis 2025 Global Crypto Adoption Index, leading every sub-category. Figures raised in the Budget 2026-27 debate suggested that around 73% of Indian VDA trading takes place on foreign exchanges, which, if accurate, means most activity sits beyond the TDS net that the tax regime relies on.

What to watch next

• Winter session of Parliament (late 2026). Whether the Standing Committee finalises its VDA study and what it recommends on a regulator.
• The DEA discussion paper. Any publication would be the first formal statement of government policy on crypto. Watch for whether it treats stablecoins differently from other crypto.
• First filings under the new Income-tax Act. Returns for 2026-27, due in 2027, will be the first under the Income-tax Act, 2025, with platform transaction statements now feeding into tax records.
• More FIU-IND takedowns. After 25 notices in October 2025 and 15 in September 2026, further action against unregistered offshore platforms looks likely.
• International reporting. A CBDT notification of 5 March 2026 reportedly brought crypto, CBDCs and e-money into the scope of financial assets for FATCA/CRS reporting, which matters for NRIs holding crypto abroad. For the global AML picture see our FATF Travel Rule explainer.

This article describes Indian law and policy as of August 2026, with later developments noted. It is not tax, legal or investment advice. Readers should consult a chartered accountant or lawyer about their own situation.

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