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India is a country that is very much seen as one of the leading lights in the tech world, so it comes as no surprise that cryptocurrency trading has proven to be big business. In an age where decentralised finance poses a threat to government tax revenue, it’s also no surprise that there have been regulatory changes.
Any savvy investor will rightly want to know what their options are and how their cryptocurrency trading portfolio will be affected by such changes. In this guide, we’re going to dive into the details and tell you everything you need to know.
Is Cryptocurrency Legal Tender in India?
Right now, the Indian Government does not recognise cryptocurrency as a form of tender, but that does not mean it won’t change in the future. In 2025, cryptocurrencies that are used in India fall under the Prevention of Money Laundering Act (PMLA). The decentralised nature of cryptocurrencies has made the authorities aware of their potential use in organised crime. The PMLA has been applied to the crypto asset class to provide oversight and protection in this regard.
One of the key developments of this approach is that what are referred to as ‘Virtual Asset Service Providers’ (VASPs) are legally bound to follow a strict series of reporting standards. These standards have been developed in line with those that are already applied to traditional banks, lenders, and other mainstream financial institutions.
Is Cryptocurrency Taxed in India?
Investors should know that every cryptocurrency investment in India will have a 30% tax levied on any profits generated. In addition to this levy, there is also a 1% Tax Deducted at Source (TDS) that is applied to all transactions. This is an attempt by the authorities to limit the drop in tax revenue that would occur if millions of citizens moved their money to cryptocurrencies.
With cryptocurrencies now heavily covered by the Indian tax code, making trades via an established forex trading brokerage becomes even more important. The fact that the authorities can ask for financial records and details of trades and profits from previous tax years means that detailed recordkeeping is now essential.
An industry that was once very much in its infancy is now subject to a far higher level of government scrutiny — a level comparable to that of many of the mainstream lenders. A correctly regulated brokerage will be able to provide you with details of any and all transactions and trades you have placed with them.
More Regulation on the Horizon
Investors should also be aware that more regulation has already been discussed, with reports indicating that it is likely to take the following form:
- Background checks on people who hold and use cryptocurrency that are in line with the checks when a borrower takes out a traditional loan with a bank.
- Direct reporting of the amount of cryptocurrency held by a solo trader, trading house, or a private individual for personal use.
- Increases in the tax rates with potential breaks for institutional cryptocurrency users who sign up to special agreements and provide greater transparency.
It can be difficult to predict the exact nature of future regulation because of the number of different parties and vested interests involved. Investors who have a clear strategy in place for several of the most likely outcomes are the ones who are most likely to profit from the next wave of regulatory changes.
The Right Tax Strategy
Anyone looking to achieve financial goals faster will be pleased to know that there are steps you can take to soften the impact of these tax changes. The right tax strategy will allow smart investors to strategically manage risk in the market as well as tax liability at home. A look at the key points will illuminate how such a strategy can take shape:
- Investors who build their tax liability into a calculation of their bottom-line profit will be able to plan ahead strategically.
- Putting tax aside in a separate account and not falling back on this account to trade from will ensure that the authorities can always be paid.
- Hiring the services of an expert in cross-border taxation may help if you are trading cryptocurrencies between multiple countries, one of which is India.
Investors who take a forward-thinking approach to cryptocurrency regulations and tax requirements will be able to ensure 100% compliance at all times. This is vital for the avoidance of substantial financial and legal penalties.
The Importance of Compliance
Compliance is what will ensure that any and all trades you place with cryptocurrencies are not unduly scrutinised by Indian regulators. Unfortunately, traders or investment groups who fall foul of the new rules just once will find themselves repeatedly audited in a way that a competitor who has remained compliant simply won’t experience.
Making sure that all trades and transactions are made in line with local and international regulations is of paramount importance. A key step is to move all trades onto a fully compliant cryptocurrency trading platform without delay.
By remaining compliant at every stage, traders and investors will be able to focus on what they do best. This is essential if they are going to be able to secure consistent returns from one of the most challenging and dynamic markets.
Conclusion
The authorities in India have placed one of the biggest taxes on cryptocurrency trading profits, as well as a tax at the point of use. While they argue that this is to protect the wider public from potential misuse — and the drop in tax revenue that they argue would result — investors are more concerned by the impact on their profits. This is understandable given the size of the increase and the prospect for further increases in the not-too-distant future.
Trading via an established brokerage platform is a proven way to ensure that you can manage your tax liability by staying compliant with the tax code. This is because the platform will be able to provide you with comprehensive details of every trade and transaction, allowing you to pass everything to your bookkeeper or accountant. The result will be a seamless adaptation in the face of what is expected to be a continually changing tax code in India.