The legal position
India occupies an unusual middle ground. Crypto is not banned, but it is taxed at a level that discourages active trading, and the compliance architecture is built around monitoring rather than enabling.
Service providers dealing in virtual digital assets must register with the Financial Intelligence Unit — India as reporting entities under anti-money-laundering rules. That registration brings obligations around customer identification, record-keeping and reporting suspicious transactions.
The enforcement of that requirement has been real. Several offshore exchanges operating without FIU-IND registration had access restricted, and some later registered and returned. For users, the practical lesson is that using an unregistered platform carries access risk, not just theoretical regulatory risk. People have found themselves unable to reach funds with little warning.
The 30% flat rate
This is the defining feature of the Indian regime and it is far stricter than anything else covered on this site.
Income from the transfer of a virtual digital asset is taxed at a flat 30%, plus applicable surcharge and cess. The rate does not vary with your income bracket and there is no long-term holding concession of the kind Australia offers.
Two features make it harsher than the headline rate suggests:
- No deductions other than the cost of acquisition. Exchange fees, infrastructure costs and other expenses are generally not deductible against VDA income.
- Losses generally cannot be set off against other income, and typically cannot be carried forward. A profitable trade and a loss-making trade do not net against each other in the way they would for most asset classes.
The combined effect is that gross activity is taxed rather than net outcome, which changes the economics of frequent trading considerably. Confirm current provisions with the Income Tax Department. This area has been amended more than once.
Why the 1% TDS matters
The tax deducted at source is the provision that quietly reshapes behaviour, and it gets far less attention than the 30% headline.
A TDS of 1% applies to the transfer of virtual digital assets above specified thresholds, withheld at the point of transaction rather than settled at year end.
It applies per transaction, not per profit
One percent taken from each transfer is a small cost once and a large one at volume. It is withheld whether the trade made money or lost it, which means an active trader can be paying TDS on a sequence of transactions that produced no gain at all.
For anyone moving in and out of positions regularly, this is frequently the binding constraint rather than the 30% rate.
TDS is creditable against the eventual liability, so it is a cash-flow cost rather than a pure additional tax in most cases. But the working capital effect is real, and it is the reason Indian crypto activity shifted noticeably toward holding rather than trading after the provisions took effect.
Bonuses after tax
Evaluate any Indian crypto promotion after the tax treatment, because the gap between headline and realised value is wider here than anywhere else on this site.
Crypto received as a bonus is generally income. Under the VDA regime, with no deductions available beyond acquisition cost, the after-tax value of a modest bonus is meaningfully less than the advertised figure. Add the TDS friction on any subsequent transfer and a headline number becomes noticeably smaller in your hands.
That does not mean offers are worthless. It means the decision should be driven by the things that matter continuously — FIU-IND registration, INR deposit and withdrawal reliability, spreads, and how the platform handles TDS reporting on your behalf — rather than by a one-off credit.
TDS handling in particular is worth asking about before choosing a platform. Exchanges differ in how cleanly they deduct, document and report it, and a platform that does this well saves genuine administrative pain at filing time.
Gift cards as an alternative
One structural observation worth making for Indian readers, because it follows directly from the tax design.
The regime penalises frequent transactions more than it penalises holding. Each transfer attracts TDS; each disposal attracts the flat rate with no netting. That argues for fewer, larger, deliberate actions rather than active movement.
Spending crypto on gift cards is one such deliberate action rather than a trading pattern, though the disposal treatment still applies and should be recorded. Coinsbee’s catalogue extends across more than 180 countries and includes substantial Indian brand coverage, which makes it the practical option for anyone here wanting to convert holdings into usable value. Our fees guide covers keeping that conversion cheap.
The honest summary for Indian readers
India’s rules are not designed to make crypto trading attractive, and no promotional offer changes that arithmetic. What they leave intact is holding and deliberate spending.
If you are here for a welcome bonus, the after-tax number is probably smaller than you expect. If you are here to understand how to use crypto you already hold without creating a compliance problem, that is a more productive question and this framework answers it reasonably well.