Bitcoin in India: Legal Status, the 30% Tax and the Right to Self-Custody

As of October 19, 2026, holding Bitcoin is legal in India, but it is not legal tender. The Income-tax Act, 2025 classes Bitcoin as a "virtual digital asset" and taxes gains on transfer at a flat 30%, with 1% tax deducted at source on transfers. Businesses that exchange, transfer or hold Bitcoin for others must register with the Financial Intelligence Unit-India under the Prevention of Money-laundering Act, 2002.

Yes. Indian law defines Bitcoin, taxes it and regulates the businesses that handle it for others, and no Act of Parliament makes it an offense for an individual to own it.

The one serious restriction, an RBI ban on banks serving Bitcoin users, was struck down by the Supreme Court in 2020.

No. Legal tender means money that must be accepted to settle a debt. The Reserve Bank of India (RBI) explains in its FAQ on Indian currency that under section 26 of the RBI Act, 1934, "every bank note shall be legal tender at any place in India". Coins issued under section 6 of the Coinage Act, 2011 are also legal tender. Bitcoin is neither.

The Income-tax Act, 2025 calls it a virtual digital asset. Section 2(111) has four limbs. Clause (a) covers any information, code, number or token, other than Indian or foreign currency, "generated through cryptographic means or otherwise" that provides "a digital representation of value" and can be "transferred, stored or traded electronically".

Clause (d) removes any doubt. It covers "any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger", whether or not the earlier clauses apply. The Central Government may exclude assets by notification.

It no longer applies. RBI circular RBI/2017-18/154, reference DBR.No.BP.BC.104/08.13.102/2017-18, dated April 6, 2018, directed that entities regulated by the RBI "shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs". It was addressed to banks, payments banks, small finance banks, non-banking financial companies and payment system providers.

The Supreme Court set the circular aside on March 4, 2020. The official headnote records that the circular "is set aside on the ground of proportionality". Proportionality is the test of whether a restriction goes further than its aim requires.

Yes. Banks may serve Bitcoin users, subject to normal customer checks. The RBI said so in circular RBI/2021-22/45, reference DOR.AML.REC 18/14.01.001/2021-22, dated May 31, 2021, and titled "Customer Due Diligence for transactions in Virtual Currencies (VC)".

The circular responded to banks that were still warning customers by citing the 2018 circular. The RBI stated that, because the Supreme Court set that circular aside, it "cannot be cited or quoted from". The 2021 circular went to the same categories of regulated entities.

Banks may still apply customer due diligence. The circular names know-your-customer, anti-money laundering and counter-terrorist financing standards, obligations under the Prevention of Money-laundering Act, 2002, and the Foreign Exchange Management Act, 1999 provisions for overseas remittances.

In practice: your bank may ask where funds sent to or received from a Bitcoin platform come from, and a remittance abroad to buy Bitcoin is checked against foreign exchange rules like any other.

No. The registration duty falls on businesses that act for others, not on individuals who hold their own Bitcoin.

Notification S.O. 1072(E), issued by the Ministry of Finance, Department of Revenue, on March 7, 2023, designates five activities carried on "for or on behalf of another person" in the course of business:

Anyone carrying on these activities becomes a reporting entity under the Prevention of Money-laundering Act, 2002 (PMLA). A reporting entity is a business that must verify customers, keep records and report suspicious transactions.

Yes. In a Ministry of Finance press release of September 9, 2026, the Financial Intelligence Unit-India (FIU-IND) stated that the obligations "are activity-based and are not contingent on physical presence of the entity in India". It announced notices to 15 providers under section 13 of the PMLA and notices to take down their apps and websites.

Enforcement is real. On January 31, 2025, FIU-IND imposed a penalty of ₹9,27,00,000 on Bybit Fintech Limited for operating without registration, citing section 12(1) of the PMLA.

Registered providers must apply the travel rule and treat self-hosted wallets as high risk. FIU-IND's AML & CFT Guidelines for Reporting Entities Providing Services Related to Virtual Digital Assets took effect on March 10, 2023. They state that "all SPs are required to register as Reporting Entities with FIU-IND".

The travel rule is the requirement that sender and recipient details move with a transfer. The guidelines require providers to include "required and accurate originator information" and beneficiary information on transfers.

A self-hosted wallet, also called an unhosted wallet, is one whose private keys you control. The guidelines state that "VDA transfers to / from unhosted wallets are categorised as high risk".

In practice: withdrawing sats from an Indian platform to your own wallet is lawful. The guidelines treat it as a higher-risk transfer for the platform, which means closer review.

Gains on transferring Bitcoin are taxed at a flat 30%, and losses cannot reduce other income. The Income-tax Act, 2025 (Act No. 30 of 2025) has applied since April 1, 2026. Section 1(3) sets that date, and the Income Tax Department states that the 1961 Act stands repealed by section 536.

Thirty percent. Under section 194, Table Sl. No. 4, "any income from the transfer of any virtual digital asset" is taxed at 30%. The Income Tax Department's guide to virtual digital assets adds that surcharge and cess apply on top.

The rate is the same for a short-term trade and a ten-year hold. Income level does not change it either.

Only the cost of acquisition. Section 194, Table Sl. No. 4, allows "no deduction in respect of any expenditure (other than cost of acquisition, if any) or allowance or set off of any loss".

Losses are isolated. A loss from transferring a virtual digital asset cannot be set off against any other income, and it cannot be carried forward to later years.

TDS means tax deducted at source: the buyer withholds part of the price and pays it to the government. Under section 393(1), Table Sl. No. 8(vi), "any person" paying consideration "for transfer of a virtual digital asset" must deduct 1%.

Section 393(4), Table Sl. No. 12, sets the thresholds below which no deduction is made in a tax year:

Where payment is wholly or partly in kind, Note 6 requires the payer to ensure the tax has been paid before releasing the consideration.

Yes. Section 509 requires prescribed reporting entities to furnish information on crypto-asset transactions. Rule 243applies to each calendar year starting on or after January 1, 2026, with the statement due in Form No. 167 by May 31 of the following year.

The statement covers each user's identity, residence and tax identification number, and aggregate acquisitions, disposals and transfers by asset type, in Indian rupees.

A gift of Bitcoin can be taxable income for the recipient. Under section 92(2)(m)(iii)(A), where property received without consideration has an aggregate fair market value above ₹50,000 in a tax year, the whole value is taxed. Section 92(5)(f)(x) lists "virtual digital asset" within property.

Section 92(3) exempts property received from a relative, on the occasion of marriage of the individual, or "under a will or by way of inheritance". Bitcoin passed to heirs therefore falls outside this charge.

Self-custody is lawful and needs no registration. The PMLA notification reaches activities carried on for others, and the RBI's 2018 restriction on banks no longer applies.

Self-custody does not change the tax. A transfer of Bitcoin is taxed at 30% wherever the coins were held. The practical exposure sits where Bitcoin meets rupees: TDS on transfers, platform reporting under section 509, and bank due diligence on remittances.

Yes. Indian law defines Bitcoin as a virtual digital asset under section 2(111) of the Income-tax Act, 2025, taxes its transfer and regulates businesses that handle it for others. No Act of Parliament makes ownership an offense. Bitcoin is not legal tender: under section 26 of the RBI Act, 1934, bank notes are.

The RBI's circular of April 6, 2018 barred regulated entities, such as banks, from dealing in virtual currencies or serving those who did. It did not bind individuals. The Supreme Court set it aside on March 4, 2020, and the RBI's circular of May 31, 2021 states it cannot be cited.

Income from transferring Bitcoin is taxed at 30% under section 194 of the Income-tax Act, 2025, Table Sl. No. 4, with surcharge and cess on top. Only the cost of acquisition is deductible. The rate does not depend on how long you held the coins or on your other income.

No. Section 194 of the Income-tax Act, 2025, Table Sl. No. 4, bars setting off any loss in computing income from a virtual digital asset. A loss from transferring one cannot be set off against any other income, and it cannot be carried forward to later tax years.

Under section 393(1) of the Income-tax Act, 2025, Table Sl. No. 8(vi), any person paying for the transfer of a virtual digital asset deducts 1% tax at source. Section 393(4) exempts payments up to ₹50,000 a year by qualifying individuals and Hindu undivided families, and up to ₹10,000 by other payers.

They must register with the Financial Intelligence Unit-India as reporting entities under the Prevention of Money-laundering Act, 2002, following notification S.O. 1072(E) of March 7, 2023. FIU-IND states the duty is activity-based and applies to offshore providers serving India. It fined Bybit ₹9,27,00,000 on January 31, 2025.

Yes, for the recipient, if property received without consideration in a tax year exceeds ₹50,000 in aggregate fair market value, under section 92(2)(m)(iii)(A) of the Income-tax Act, 2025. Section 92(3) exempts gifts from a relative, gifts on marriage, and property received under a will or by inheritance.

This article is general information and not legal advice.

To see how India compares with other countries, open The Bitcoin Act's interactive Global Bitcoin Regulatory Map. It sets legal status, self-custody, tax and seizure risk side by side across jurisdictions: https://thebitcoinact.xyz/bitcoin-legal-map

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