Crypto in India: How to Invest, Trade & Stay Legal

2026.01.22 2026.01.22
Crypto Investment in India: The Ultimate Guide to Legal Status, Taxes & Trading

Jana Kanehttps://www.litefinance.org/blog/authors/jana-kane/

Cryptocurrency is increasingly becoming part of personal investments alongside stocks and bonds. The Indian market is growing rapidly, and interest in crypto in India is rising along with it. New investors are looking for a simple and clear way to purchase Bitcoin and other cryptocurrencies. The Supreme Court of India has confirmed the right of citizens to own virtual digital assets, while the Reserve Bank continues to closely monitor the market.

All cryptocurrency exchanges require users to complete KYC. Profits from crypto investments are taxed at 30%, with TDS applied. This is a tax that is deducted immediately when transactions are executed. In this article, we will take a detailed look at how to invest in cryptocurrency in India and how to avoid legal issues.

Major Takeaways

• Cryptocurrency has been legal in India since 2020.

• The Supreme Court has ruled that citizens may own digital assets.

• Profits from cryptocurrency are taxed at 30%.

• An additional 1% TDS is charged on transactions.

• You cannot offset crypto losses against crypto gains.

• The KYC process is mandatory for all centralized cryptocurrency exchanges.

• The minimum amount to start investing is around 500 Indian rupees.

• Popular crypto exchanges in India include WazirX, CoinDCX, and ZebPay.

Is Crypto Legal in India?

Cryptocurrency is legal in India. This is a key point for all investors. There is no law in the country that prohibits owning cryptocurrency. Citizens can buy, hold, and sell digital coins. Bitcoin trading in India is growing rapidly, and the market continues to expand each year.

The traditional banking system regulates the crypto market through taxation and strict oversight, with profits from transactions taxed at 30%. All transactions are recorded to reduce grey areas and increase transparency.

Current Regulatory Framework

In 2020, the Supreme Court of India lifted the banking ban on cryptocurrency, which became a turning point for the market. After the ban was lifted, cryptocurrency exchanges began to grow rapidly, and investors gained access to deposits via bank transfers.

Under Indian law, crypto is classified as a virtual digital asset and is not considered legal tender. It cannot be used to pay for goods, but ownership and trading are allowed. Transactions are carried out freely through exchanges and hardware wallets.

Role of Key Regulatory Bodies

The regulatory landscape in India is shared among several government authorities. Each of them is responsible for a specific part of the market. This approach reduces risk for investors and makes trading more transparent.

FIU-IND stands for the Financial Intelligence Unit India. This government body is responsible for financial monitoring. It registers cryptocurrency exchanges and oversees compliance with AML (Anti-Money Laundering) rules. Each platform must report suspicious transactions, which helps filter out unreliable exchanges. Dozens of cryptocurrency exchanges have already completed this registration process.

The Reserve Bank of India monitors the stability of the financial system but does not directly manage crypto exchanges. Its role is to assess systemic risk. The bank regularly warns about crypto volatility, as prices can change sharply. This is especially important for new investors who are just starting to invest in crypto. 

SEBI, the Securities and Exchange Board of India, regulates investment activity and protects investors. SEBI oversees how platforms work with clients. Special attention is paid to advertising standards and proper risk disclosure.

COINS Act 2025

The COINS 2025 law introduced clearer rules for the crypto market in India. Its main goal is transparency and control. The government did not ban cryptocurrency; instead, it chose to regulate the market.

All platforms must register with regulators and submit client data. The KYC process has become mandatory for all users. Without identity verification, users cannot start trading or withdraw money.

The law also strengthened security requirements. Exchanges must protect client assets and store data in secure systems. Serious violations can result in substantial fines. 

COINS 2025 also affected reporting standards. Platforms record all transactions, and this data may be shared with tax authorities. It has become harder for investors to hide income, but the rules are now clearer and more predictable. New investors should choose only licensed exchanges. This helps reduce risk and avoid violations of Indian regulations. 

Cryptocurrency Taxation Rules in India

Cryptocurrency taxation in India is clearly defined in Sections 115BBH and 194S of the Income Tax Act. Profits from transactions are taxed at 30%. This tax applies to all virtual digital assets. In addition, a 1% TDS applies. This is a tax applied to every sale transaction and charged automatically. It is important to note that even if an investor incurs a loss, TDS is still applied.

New investors often get confused with calculations, and these mistakes can lead to penalties. That is why it is important to keep records of all transactions from the very beginning.

Common Tax Mistakes to Avoid

Many investors make mistakes not because the rules are complex, but because they are inattentive. The first common mistake is ignoring the 1% TDS when selling crypto. This tax is deducted on every transaction, even if a trade results in a loss. Ignoring TDS can lead to penalties. In some cases, the fine can reach up to 100% of the tax amount, and in rare cases, criminal liability may arise.

The second mistake is trying to offset losses. In India, this is not allowed. Only profits are taken into account, and losses cannot be carried forward. This is especially important to remember when trading cryptocurrency actively.

The third mistake is choosing the wrong tax form. Many investors file incorrect returns, which leads to audits and fines.

Another common issue is forgotten transactions. Even an airdrop, meaning tokens received for early network activity, is considered income and must be declared. 

Keep screenshots of transactions and maintain records from the first day you start investing. This helps avoid legal issues.

Which ITR (Income Tax Return) form to choose?

ITR-2 is suitable for capital income. This option is commonly used by new investors and long-term investors. If crypto is bought and sold occasionally, this form is the right choice. Income is reported under Schedule VDA. The tax rate is 30% and applies only to profits. Other fees and expenses are not considered.

ITR-3 is used for business income. This option is suitable for frequent trading. All transactions are reported in the return, and trading fees and TDS are also taken into account. The tax rate remains 30%, but it is calculated after expenses.

How to Invest in Crypto in India

There are several ways to start investing in cryptocurrency in India. Everything depends on goals and risk appetite. Some investors prefer to trade crypto actively, while others look for where to buy crypto in India and hold assets for the long term.

CFDs are one of the simplest options. There is no need to buy crypto directly or deal with cryptocurrency wallets, private keys, or blockchain networks. This approach suits active traders.

Buying cryptocurrency directly through a crypto app is better suited to long-term investments. This option requires preparation. An investor needs to choose a cryptocurrency exchange and focus on security, but in return, they gain full control over their assets.

Before investing, it is important to assess risk. Crypto markets are highly volatile, and prices can change sharply. It is better to start with small amounts. This helps investors get familiar with the market gradually and learn from mistakes without excessive risk.

Method 1: Trading Crypto CFDs (Recommended for Active Traders)

CFDs are contracts based on price differences. Investors do not buy cryptocurrencies directly but profit from price movements. It is possible to open both long and short positions. Short positions allow traders to benefit when prices fall, while long positions are used when prices rise.

CFDs allow traders to use leverage. This means using borrowed funds provided by the broker. For example, a leverage of 1:100 increases the trading limit one hundred times. This allows larger positions but requires careful control of risk appetite.

New users are advised to start with a demo account. This is the safest way to understand how crypto trading works without risking real money.

Method 2: Buying Crypto Directly on Indian Exchanges

The second option is to buy cryptocurrencies directly. This is done through a cryptocurrency exchange. After users sign up and complete KYC, they can fund their accounts via bank transfer.

This option suits those who plan to hold crypto for the long term. After purchase, it is recommended to withdraw assets to hardware wallets. This way, full control over assets remains with the owner.

Steps to buy cryptocurrencies

1. Choose a cryptocurrency exchange

2. Register an account

3. Provide PAN and Aadhaar details

4. Fund the bank account in Indian rupees

5. Buy cryptocurrencies 

6. Withdraw crypto to a wallet 

7. Write down the seed phrase on paper and store it in a secure place

PAN is a tax identification number used to track income and pay taxes. 

Aadhaar is a national identity number. It confirms that the user is a real person.

Comparison of popular platforms

What is Cryptocurrency Mining

Mining is the process of creating new digital coins and validating transactions. It takes place within blockchain networks. In simple terms, computers verify user activity on a public ledger, and the network rewards miners with crypto.

Each transaction is grouped into a block, which is then added to the blockchain. To add a new block, equipment solves complex mathematical problems. This requires significant computing power. The more powerful the hardware, the higher the chance of receiving a reward.

Miners use graphics cards or specialized devices known as ASICs. These devices are designed exclusively for mining. Standard computers are not suitable, as they lack sufficient power and tend to overheat quickly.

The main cost of mining is electricity, since the equipment runs continuously. Stable internet connectivity is also critical, as computing power is wasted without it.

Mining income depends on network difficulty and the value of crypto. 

Is Crypto Mining Profitable in India?

In short, it is usually more risky than profitable. In India, mining largely depends on electricity costs. Even good equipment can run at a loss. That is why careful calculation is essential before purchasing equipment.

In practice, the hardware keeps running, producing heat and noise, while costs add up every day.

There may be profit, but it is small. High upfront costs and long payback periods also make mining less attractive.

Comparison of options

GPU mining in India is usually unprofitable. ASIC mining can generate money, but it is better suited to experienced investors. For new investors, simpler options such as CFD trading or staking are often a safer choice, as they do not require expensive equipment.

A simple rule applies: do not rely on promotional numbers. Use a calculator, apply local electricity tariffs, and only then decide whether mining fits your risk appetite.

Conclusion

Cryptocurrency in India is legal and accessible for private investors. It is possible to start with a small amount, from 500 Indian rupees. The KYC process on exchanges is straightforward and takes little time. The profit tax rate is 30%, and it is important to pay it properly. CFDs are suitable for active traders. For long-term investments, a better option is to buy crypto directly on a cryptocurrency exchange and gain exposure to this asset class.

Mining in India makes sense mainly for professionals using ASIC equipment. Volatility creates both opportunities and risk. Crypto trading helps develop discipline and patience in a fast-changing world. Study the market, practice on a demo account, and invest only within your limits.