Legal Status of Cryptocurrency in India: Regulations, Taxes, and Government Position

Cryptocurrency is not illegal in India, but it operates under a complex regulatory environment. The Reserve Bank of India (RBI) has expressed concerns about the risks associated with virtual currencies (VCs) and has not authorized any entity to deal with them. In a press release, the RBI stated, "The Reserve Bank of India advises that it has not given any licence / authorisation to any entity / company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.

IDespite the RBI's caution, the Indian government has taken steps toward regulating digital assets. In 2022, the Finance Ministry introduced a 30% tax on income from virtual digital assets, signaling an acknowledgment of cryptocurrency transactions. Additionally, the government is exploring the introduction of a Central Bank Digital Currency (CBDC), known as the Digital Rupee, to provide a regulated digital alternative.

The e₹-R is in the form of a digital token that represents legal tender. It is being issued in the same denominations as the paper currency and coins (1).

The legal framework for cryptocurrencies in India remains uncertain. While there is no outright ban, the lack of clear regulations and the RBI's warnings create a cautious environment for investors and businesses dealing with virtual currencies. The government's move toward a CBDC indicates a preference for a state-controlled digital currency over decentralized cryptocurrencies.

Source:
(1) Reserve Bank of India
(2) Press Information Bureau

Last updated: 08-05-2025 Disclaimer: This article does not provide legal advice. If you need legal advice, please contact an attorney directly.