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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsCrypto is not legal tender in India. But India taxes transfers of assets that meet its definition of virtual digital assets (VDAs), and specified businesses providing VDA services have anti-money-laundering obligations. The Supreme Court set aside the RBI’s 2018 circular restricting regulated entities’ dealings with virtual currencies; that did not make crypto legal tender or create blanket approval for every token or transaction. This overview reflects central rules checked on 8 October 2026.
What “legal” means for crypto in India
“Legal” can mean different things: whether an asset is official money, whether someone may hold or transfer it, how a transfer is taxed, or what rules apply to a business facilitating transactions. Those questions do not have the same answer. In particular, a tax rule recognising and taxing VDAs does not turn them into currency or settle every question about a particular token or transaction.
| Question | What the rules establish |
|---|---|
| Is crypto Indian legal tender? | No. A VDA is not thereby official Indian currency. |
| Are VDA transfers covered by tax rules? | Yes. The Income-tax Act contains specific rules for income from transfers of VDAs, subject to the statutory definition and other applicable provisions. |
| Do specified crypto-service businesses have compliance duties? | Yes. Certain VDA activities performed for another person in the course of business fall within the PMLA reporting framework. |
| Does the Supreme Court ruling amount to blanket approval? | No. It set aside a particular RBI circular; it did not establish legal-tender status or displace other applicable law. |
What counts as a virtual digital asset?
The Income-tax Act’s VDA definition is broad. The current Income Tax Department text includes crypto-assets that rely on a cryptographically secured distributed ledger or similar technology. A clause added by the Finance Act 2025 took effect on 1 April 2026. The definition also covers qualifying tokens and non-fungible tokens (NFTs), subject to statutory exclusions and notifications.
That does not mean every digital item is automatically a crypto-asset. Points, vouchers, subscriptions and central-bank digital currency should not be treated as VDAs without checking the legal definition and its exclusions. The classification of a particular token can depend on its features and the applicable law.
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In Internet and Mobile Association of India v. Reserve Bank of India, decided on 4 March 2020, the Supreme Court set aside the RBI’s April 2018 circular. That circular had restricted RBI-regulated entities from dealing with virtual currencies or providing related services. The judgment concerned that circular; it was not a declaration that crypto is legal tender, nor a guarantee that every bank or transaction will be available.
In a 31 May 2021 circular, the RBI said regulated entities should not rely on the circular that the Court had set aside. The RBI stated: “Such references to the above circular are not in order as this circular was set aside by the Hon’ble Supreme Court on March 04, 2020 in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India).” The same RBI circular says regulated entities may continue customer due diligence under KYC, AML/CFT, PMLA and relevant FEMA requirements, including for overseas remittances.
How VDA transfers are taxed
Section 115BBH: tax on income from transfers
Section 115BBH applies a 30% rate to income from the transfer of a VDA. In computing that income, the law permits the cost of acquisition, if any, but does not permit deductions for other expenditure or allowances. A loss from VDA transfers cannot be set off against other income or carried forward under this section.
The 30% rate concerns income from VDA transfers under section 115BBH; it is not a statement that every crypto transaction has the same tax outcome. Classification, the transaction facts and the applicable return instructions matter.
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Section 194S generally provides for 1% tax deducted at source (TDS) when consideration for transferring a VDA is paid to a resident. Statutory thresholds differ for specified persons and other payers, so the 1% rule should not be read as applying identically to every transfer. TDS is withholding at transaction time; it is distinct from the section 115BBH computation of tax on transfer income.
Reporting and records
The Income Tax Department’s VDA return schedule calls for transaction-wise reporting. Follow the instructions for the relevant return form and your circumstances. As a practical aid to accurate reporting, keep records of acquisition and disposal dates, consideration received or paid, and acquisition cost. This is useful recordkeeping guidance, not a claim that a particular recordkeeping tool is legally mandated.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Which crypto businesses have anti-money-laundering duties?
In March 2023, specified VDA service activities were brought within the PMLA reporting-entity framework. FIU-IND’s registration notice identifies activities carried out for another person in the course of business, including:
- Exchange between a VDA and fiat currency.
- Exchange between one or more forms of VDAs.
- Transfer of VDAs.
- Safekeeping or administration of VDAs or instruments enabling control over them.
- Certain financial services related to an issuer’s offer and sale of a VDA.
Covered providers face registration and AML/CFT obligations. These are duties attached to specified service-provider activities; they do not mean every individual who holds crypto must register with FIU-IND merely for holding it.
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What should you check before using a crypto service?
India’s rules distinguish a provider’s compliance from a customer’s tax and transaction responsibilities. When assessing a service, check its compliance information and the records it makes available rather than assuming that access to a platform settles the legal status of an asset or transaction.
- Look for clear information about applicable FIU-IND registration and the provider’s KYC and AML/CFT processes.
- Check whether you can obtain transaction records that show dates, assets, consideration and other information needed for your tax reporting.
- Do not treat a provider’s availability or a bank’s handling of a transaction as proof that every token, DeFi arrangement or cross-border transfer has the same legal treatment.
No exchange is endorsed here. Token-specific securities questions, DeFi structures, cross-border transfers and individual tax positions may require separate analysis. For an unusual transaction or uncertain filing position, consult a qualified Indian tax or legal professional.
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