Crypto: what it is and the Indian rules
What a crypto asset is, how India taxes it, who oversees it, and why it sits outside mutual funds
Rules as on 16 October 2026
Verified 16 October 2026
For training and education only. Not investment advice.
Trainer notes
Ask the room how many have been asked about crypto by a client or a relative. Most hands go up. This deck gives them facts to explain, not views to share. It is not an offer or a recommendation, and we do not recommend for or against crypto.
In India, income from crypto is taxed, but crypto products are not regulated as investments.
The Government says crypto products are unregulated, can be highly risky, and may offer no regulatory recourse for losses. Tax and anti-money-laundering rules apply all the same.
Trainer notes
The two halves of the statement confuse people. A tax rule tells you what you owe on a gain. It does not mean any regulator stands behind the product.
Four terms to know first
Crypto asset
A digital token that records value on a shared ledger secured by cryptography. Bitcoin is the best-known example.
Blockchain
The shared ledger itself: a record of transactions kept on many computers rather than by one bank.
Wallet and key
Software holding the secret key needed to move a token. If the wallet or key is lost, the tokens can be lost for good.
VDA
Virtual digital asset: the term Indian tax law uses. It covers crypto assets and non-fungible tokens (NFTs).
Take-away: Most crypto assets have no issuer promising repayment. Price is whatever buyers will pay.
Sources: Finance Bill 2022 and 2025 memoranda (definitions); RBI press release, 24 Dec 2013; bitcoin.org FAQ.
Trainer notes
The Income-tax Act, 2025, in force from 1 April 2026, widened the tax definition to include any crypto-asset that relies on a cryptographically secured distributed ledger (section 2(111)). bitcoin.org itself says bitcoin transactions are irreversible once confirmed and its price is still very volatile.
How the tax works on two trades
ONE YEAR'S TRADES
Token A: bought for ₹1,00,000, sold for ₹1,50,000.
Token B: bought for ₹60,000, sold for ₹20,000.
Overall the investor is ₹10,000 ahead.
- Token A gain: ₹1,50,000 − ₹1,00,000 = ₹50,000. Tax at 30% = ₹15,000, plus surcharge and cess where they apply.
- Token B loss: ₹40,000. It cannot be set off against the gain on Token A or any other income, or carried forward.
- So tax is ₹15,000 on an overall gain of ₹10,000. Only the purchase cost is deductible; fees are not.
- TDS of 1% on the sale amounts, ₹1,500 + ₹200 = ₹1,700, may be deducted and counts towards the tax due.
Result: Each gain is taxed at 30% on its own. Losses do not reduce it.
Illustration with invented tokens and assumed prices. Rules as introduced by the Finance Act 2022.
Trainer notes
TDS applies above a yearly threshold: ₹50,000 for 'specified persons' (broadly, individuals without large business income) and ₹10,000 for others. The Income-tax Act, 2025, in force from 1 April 2026, keeps both in section 393(4), Table Sl. No. 12.
The tax rules, one by one
| Rule | What it says | Since |
|---|---|---|
| Flat rate | Income from transferring a VDA is taxed at 30%, whatever the holding period or income slab. | 1 Apr 2022 |
| Deductions | Only the cost of acquisition. No other expense or allowance is deductible. | 1 Apr 2022 |
| Losses | No set-off against any other income and no carry forward to later years. | 1 Apr 2022 |
| TDS | The payer deducts 1% of the payment to a resident seller, above a yearly threshold. | 1 Jul 2022 |
| Gifts | A VDA received as a gift can be taxed in the hands of the person receiving it. | 1 Apr 2022 |
Source: Income-tax Act, 2025 (sections 194, 393, 92); Finance Bill 2022 memorandum (earlier sections 115BBH, 194S, 56(2)(x)).
Trainer notes
In the Income-tax Act, 2025 the 30% rule is section 194 (Table Sl. No. 4) and the 1% TDS is section 393(1) (Table Sl. No. 8(vi)); the threshold is in section 393(4). Gifts follow the general rules on gifts, so exemptions such as gifts from relatives apply.
Who oversees what
Income-tax Department
Taxes the income and collects TDS. Providers file crypto-asset statements (Form 167) from 2026; first due 31 May 2027.
FIU-IND
Since 7 March 2023, crypto exchanges, transfer and custody services are reporting entities under the money-laundering law, and must register.
RBI
Its 2018 curbs on bank dealings were set aside by the Supreme Court on 4 March 2020. Banks may still carry out customer checks.
No investment regulator
The Government says crypto products are unregulated and can be highly risky, and that losses may have no regulatory recourse.
Sources: Income-tax Act, 2025 s.509 and Rules (Form 167); Gazette notification S.O. 1072(E), 7 Mar 2023; RBI circular of 31 May 2021; PIB release, 9 Sep 2026.
Trainer notes
FIU-IND is the Financial Intelligence Unit-India, under the Ministry of Finance. The registration duty applies to offshore providers serving Indian users too. RBI's May 2021 circular told banks not to cite the 2018 circular but allowed normal KYC and anti-money-laundering checks.
Crypto is not the digital rupee
A crypto asset
- Most have no issuer and no promise of repayment.
- Not authorised by any central bank as a means of payment.
- Price set by trading; it can swing sharply.
- Products are unregulated, says the Government.
The digital rupee (e₹)
- Issued by RBI, India's central bank.
- A digital token that represents legal tender.
- Issued in the same denominations as notes and coins.
- Earns no interest, like cash. Retail pilot since 1 Dec 2022.
Sources: RBI press releases of 24 Dec 2013 and 29 Nov 2022 (retail e₹ pilot); PIB release, 9 Sep 2026.
Trainer notes
The e₹ is central bank money in digital form, held in a wallet from a participating bank and convertible into bank deposits. Using a blockchain-like ledger does not make something a cryptocurrency; who issues it and what backs it is the point.
Where things stand
The tax rates have stayed the same since 2022. Enforcement against unregistered platforms continues.
- TAX ON GAINS
- 30%Flat rate on income from each VDA transfer, plus surcharge and cess.
- TDS ON SALES
- 1%Of the payment to a resident seller, above a yearly threshold.
- REGISTERED
- 54Crypto service providers registered with FIU-IND, as on 9 Mar 2026.
- NOTICES
- 15Issued by FIU-IND to non-compliant providers; announced 9 Sep 2026.
Sources: Finance Bill 2022 memo; Lok Sabha USQ 5805, 30 Mar 2026; PIB release, 9 Sep 2026.
Trainer notes
The registered count is the latest official figure: 54 as on 9 Mar 2026 (Lok Sabha, 30 Mar 2026); the list is not public. FIU-IND also asks for unregistered platforms' sites and apps to be blocked. We name no platform.
If you learnt this from older material
What older decks say
- Bitcoin is cash for the internet, used like a card network.
- There are no specific tax rules.
- Buyers and sellers deal directly; nobody reports it.
What holds now
- Gains taxed at a flat 30% since 1 Apr 2022; 1% TDS since 1 Jul 2022.
- Service providers fall under money-laundering law since 7 Mar 2023.
- Providers file Form 167 crypto statements from 2026; first due 31 May 2027.
Take-away: Taxed, reported and watched for money laundering, but still not regulated as an investment.
Sources: Finance Bill 2022 memo; Income-tax Act, 2025 s.509; Gazette notif. S.O. 1072(E), 7 Mar 2023.
Trainer notes
Older training material predates every Indian rule on this slide. Providers file Form 167 (section 509); the Finance Act 2026 set penalties of ₹200 a day for not filing and ₹50,000 for uncorrected inaccurate data.
Four things people get wrong
Misconception'It is taxed, so it is regulated.'
What is trueTax applies to the income. No regulator stands behind the product, and losses may have no regulatory recourse.
Misconception'My crypto losses cut my tax.'
What is trueNo. A VDA loss cannot be set off against any income, including other VDA gains, or carried forward.
Misconception'RBI has banned crypto.'
What is trueRBI's 2018 curbs on banks were set aside by the Supreme Court in March 2020. Government says crypto products stay unregulated.
Misconception'The digital rupee is a crypto coin.'
What is trueThe e₹ is issued by RBI and represents legal tender. Most crypto assets have no issuer.
Trainer notes
On the third point, say exactly what happened and stop. Do not suggest that the absence of a ban says anything about whether crypto is suitable for anyone.
When a client asks about crypto
Say what we do
We are a mutual fund distributor. Crypto is not a mutual fund product. This deck is not an offer or recommendation.
Explain the tax
30% on each gain, no set-off of losses, 1% TDS on sales. Suggest a tax professional for their own case.
Repeat the official caution
The Government says crypto products are unregulated, can be highly risky, and may offer no recourse for losses.
Do not recommend either way
Do not recommend buying or selling crypto, and do not compare its returns with any fund.
Take-away: We explain the rules. We do not offer views on crypto as an investment.
Trainer notes
Rehearse this in pairs. The aim is a calm, factual two-minute answer. If the client wants to discuss a mutual fund afterwards, that is a separate conversation.
Check yourself
Question 1: A client gained ₹80,000 on one token and lost ₹30,000 on another in the same year. On what amount is the 30% tax worked out?
Answer: On ₹80,000. The ₹30,000 loss cannot be set off. Tax = ₹24,000, plus surcharge and cess where they apply.Question 2: Name the body that registers crypto exchanges under the money-laundering law, and the date from which this applied.
Answer: FIU-IND (Financial Intelligence Unit-India), under the Prevention of Money-laundering Act, from the Government notification of 7 March 2023.Question 3: A client says: 'Crypto is legal and taxed, so the Government protects my investment.' What is the accurate answer?
Answer: Income from crypto is taxed, and service providers must follow anti-money-laundering rules, but crypto products are unregulated. The Government says they can be highly risky and there may be no regulatory recourse for losses.
Sources and disclaimer
Sources for the figures in this explainer
- Tax rules (30%, deductions, losses, 1% TDS, gifts, VDA definition): Income-tax Act, 2025 (ss. 2(111), 92, 194, 393); Finance Bill 2022 memorandum.
- Crypto-asset definition and reporting from 2026: Income-tax Act, 2025 (s.2(111), s.509). Reporting penalties: Finance Act 2026, s.101.
- PMLA coverage: notification S.O. 1072(E), 7 Mar 2023. FIU-IND: Lok Sabha USQ 5805, 30 Mar 2026; PIB releases of 1 Oct 2025 and 9 Sep 2026.
- RBI press releases of 24 Dec 2013 (caution on virtual currencies) and 29 Nov 2022 (e₹ pilot); RBI circular RBI/2021-22/45, 31 May 2021.
- Bitcoin facts: bitcoin.org FAQ. Tokens and prices in the examples are invented. This deck is not an offer or a recommendation.
This material is for training and investor education only. It is not investment, tax or legal advice and is not a recommendation to buy, sell or hold any security or scheme. Examples use assumed figures unless a source and date are shown. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Trustner Asset Services Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor (ARN-286886).