Crypto Regulation in India: What's Changing in 2026?

Q: Crypto Regulation in India: What's Changing in 2026?

India has one of the strictest crypto tax regimes. Here's the current regulatory landscape and proposed changes on the horizon.

Question from BitcoinTalk: “Is crypto legal in India in 2026? What are the tax rules?”

Short answer: Crypto is legal in India but heavily taxed (30% capital gains + 1% TDS). Regulation is evolving — India’s central bank and government are working on a comprehensive framework and possibly a CBDC.

Current Status (2026)

Legal Status

Crypto is legal in India. The Supreme Court overturned the RBI’s banking ban in 2020. The government has not banned crypto, despite repeated rumors.

Tax Regime

30% tax on all crypto gains (no distinction between short-term and long-term)
1% TDS (Tax Deducted at Source) on all crypto transactions above a threshold
No offset of losses against gains
No deduction for expenses (except cost of acquisition)
No threshold for reporting — all gains are taxable

Regulatory Framework

Virtual Digital Assets (VDAs) are legally defined
Exchanges must register with the Financial Intelligence Unit (FIU)
Anti-money laundering rules apply to exchanges
Cryptocurrency is regulated under the PMLA (Prevention of Money Laundering Act)

What’s Expected to Change

Possible Changes in 2026-2027

Reduced TDS — Government may reduce 1% TDS to 0.01% for non-speculative traders
Set-off allowed — Industry is pushing for loss offset against gains
Comprehensive regulation bill — Expected to clarify exchange licensing, stablecoin rules, and custody requirements
Digital Rupee (eRupee) — RBI’s CBDC is expanding with retail pilot programs

What’s NOT Expected

Full ban — Unlikely given the Supreme Court ruling and growing industry
0% tax — Crypto will remain taxed at a premium rate
Liberal regulation — India is cautious, not permissive

How to Trade Crypto in India (Legally)

Use registered exchanges — CoinDCX, WazirX, CoinSwitch (registered with FIU)
Track all transactions — Every trade, swap, and transfer creates a tax event
File ITR — Crypto gains go under “Capital Gains” or “Income from Other Sources”
Pay TDS — 1% deducted on every transaction (adjustable against tax liability)
Keep records — Transaction dates, amounts, rupee value at each transaction

Penalties for Non-Compliance

Failure to file: Up to 100% penalty on tax due
Undisclosed crypto: 30% tax + 200% penalty possible
TDS non-compliance: Interest at 18% per year + penalty

Verdict

Crypto is legal in India, but the tax regime makes trading expensive. The 30% tax + 1% TDS discourages active trading but long-term holding is still viable (no distinction between holding periods means no advantage to holding longer).