Cryptocurrency Regulation and Compliance in India (2024): Exploring Legality, Anti-Money Laundering Rules, and Taxation Issues
As of mid-2025, cryptocurrency in India is legal to hold, trade, and invest in but not recognized as legal tender—meaning it cannot be used as official currency for payments. The government has implemented a regulatory framework focusing on taxation, anti-money laundering (AML), and compliance but has yet to enact a comprehensive dedicated cryptocurrency regulation.
Legal Status and Use
Cryptocurrencies are classified as Virtual Digital Assets (VDAs) under the Income Tax Act, 1961. Buying, selling, holding, and trading crypto on registered domestic and some international exchanges is permitted. Using crypto as payment for goods and services is prohibited. Unregistered exchanges or wallet operators are not allowed, and tax evasion or anonymous transactions beyond regulatory limits are banned.
Taxation
Profits from crypto transactions are currently taxed at a flat rate of 30%. A 1% Tax Deducted at Source (TDS) on transfers is also imposed. From the financial year 2025-2026, there is mandatory reporting of crypto gains under a new section (section 158B) of the Income Tax Act called Schedule VDA. Crypto exchanges must report detailed transaction data to tax authorities to enhance compliance and minimize tax evasion. These rules reflect India’s focus on improving transparency and aligning with international standards such as the OECD’s Crypto-Asset Reporting Framework (CARF).
Anti-Money Laundering (AML) and Compliance
Crypto entities must register with the Financial Intelligence Unit - India (FIU-IND). AML regulations place limits on anonymous transactions, aiming to prevent illicit use. The regulatory environment is cautious, seeking to balance innovation with the need for oversight and preventing misuse.
The Travel Rule
While not explicitly stated, India’s adoption of the OECD CARF and AML registration for crypto entities implies alignment with global AML/CTF measures including the FATF Travel Rule, which requires sharing of originator and beneficiary information for crypto transactions above thresholds. Moves toward greater regulatory clarity and reporting frameworks indicate India’s intent to increasingly comply with international AML norms, though detailed domestic implementation of the Travel Rule is still evolving.
Proposed India Cryptocurrency Bill and Regulatory Future
India has not yet introduced a definitive, comprehensive cryptocurrency legislation. However, industry groups have proposed model crypto laws, such as the COINS Act (Crypto-systems Oversight, Innovation and Strategy Act), which aims to transform India into a crypto-friendly jurisdiction by addressing punitive taxation, regulatory ambiguity, privacy, and defining digital rights. The COINS Act is currently a non-binding blueprint and has not been passed by parliament. The government’s stance remains cautious, with ongoing efforts to create a unified regulatory framework that covers foreign exchange, securities, payments, and goods and services tax domains, which are currently ambiguous.
In summary, India’s cryptocurrency regulation in 2025 is characterized by legality with strict taxation and AML oversight, ongoing efforts to clarify regulation, and a focus on transparency and international compliance, but without a finalized comprehensive legal framework or official enactment of a dedicated crypto bill.
| Aspect | Status in India (2025) | |-----------------------|-------------------------------------------------------------| | Legal status | Crypto legal to hold/trade/invest; not legal tender | | Taxation | 30% flat tax on gains; 1% TDS on transfers; mandatory reporting via Schedule VDA | | AML & Compliance | AML registration mandatory; limits on anonymous transactions; alignment with FATF standards including Travel Rule (evolving) | | Travel Rule | Implicitly adopted via OECD CARF and FIU registration, detailed domestic rules developing | | Comprehensive Bill | No official law yet; COINS Act proposed as industry blueprint but non-binding |
The Indian government has implemented a regulatory framework for cryptocurrencies that focuses on taxation, anti-money laundering (AML), and compliance, while also aligning with international standards like OECD's Crypto-Asset Reporting Framework (CARF) and the FATF Travel Rule. Cryptocurrencies are classified as Virtual Digital Assets (VDAs) and are subject to a flat rate of 30% tax on profits, a 1% Tax Deducted at Source (TDS) on transfers, and mandatory reporting under Schedule VDA from the financial year 2025-2026. Additionally, crypto entities must register with the Financial Intelligence Unit - India (FIU-IND) and comply with AML regulations to prevent illicit use. However, India does not yet have a definitive, comprehensive cryptocurrency legislation, with the COINS Act (Crypto-systems Oversight, Innovation and Strategy Act) proposed as an industry blueprint but not yet passed by parliament.
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