Is Crypto Legal in India in 2026? Tax, 1% TDS & FIU-IND Rules

Is crypto legal in India? Yes. As of 2026, buying, holding, selling, and trading cryptocurrencies like USDT is legal in India. There is no ban. What India has instead is a strict tax regime and mandatory registration for the platforms that serve Indian users. The government chose to tax and regulate crypto rather than prohibit it.

That distinction matters. "Legal but taxed and regulated" is very different from "banned," and it is the reason India remains one of the largest crypto markets in the world despite some of the highest taxes. This guide lays out exactly where things stand and what it means if you trade USDT peer-to-peer.

The legal status: no ban, but a defined regime

Crypto assets are officially called Virtual Digital Assets (VDAs) in Indian law. The Finance Act 2022 introduced a specific tax framework for them, which formally acknowledged their legal status. There is no law making it illegal to own or trade VDAs. The Reserve Bank of India has expressed caution, but courts and the tax code treat crypto as a legal, taxable asset class.

The Union Budget for 2026-27 kept this framework unchanged, so the rules below are current and stable for the year ahead.

The 30% tax on gains

Under Section 115BBH, income from transferring VDAs is taxed at a flat 30%, plus applicable surcharge and a 4% cess. This rate is the same regardless of your income slab, and it applies to the gain (profit) on each transfer.

Two rules make India's regime especially strict: you cannot deduct any expense other than the cost of acquisition, and crypto losses cannot be set off against other income or carried forward to future years. Each gain stands alone.

The 1% TDS on transactions

Separately, Section 194S applies a 1% Tax Deducted at Source (TDS) on VDA transfers once your transactions cross ₹10,000 in a financial year (₹50,000 for certain specified persons). TDS is not an extra tax — it is an advance credit against your final tax bill, reconciled when you file.

On a compliant P2P platform, TDS handling and certificates are managed for you. For a full breakdown, see our guide on how the 1% TDS works for P2P traders.

FIU-IND registration and KYC

Since March 2023, the Financial Intelligence Unit-India (FIU-IND) has required every VDA service provider operating in India to register as a reporting entity under the Prevention of Money Laundering Act (PMLA). Registered platforms must run KYC, monitor transactions, and file Suspicious Transaction Reports.

This is why every serious platform now mandates identity verification. It also means the safest place to trade is a platform that takes FIU-IND compliance seriously — verified counterparties, escrow, and clean records.

Reporting: Schedule VDA in your ITR

Indian taxpayers report crypto gains and holdings under Schedule VDA in their income tax return. Keep records of every trade — date, INR value, counterparty, payment method, and any TDS certificate — so filing is straightforward. Good record-keeping is the single best habit for staying compliant.

FAQ

Is crypto banned in India in 2026? No. Crypto is legal to hold and trade in India. There is no ban — instead there is a 30% tax on gains, a 1% TDS on transactions, and mandatory FIU-IND registration for platforms.

Do I have to pay tax on P2P USDT trades? Yes. Gains from selling USDT are taxed at a flat 30% plus surcharge and cess, and a 1% TDS applies to transactions above ₹10,000 in a financial year. Report gains under Schedule VDA in your ITR.

Is P2P USDT trading legal in India? Yes, provided you use a platform that complies with FIU-IND KYC and reporting requirements. Peer-to-peer trading itself is legal; use verified, escrow-protected platforms and keep your records for tax season.

This article is general information, not tax or legal advice. Consult a qualified chartered accountant for your specific situation.