India Crypto Regulation: Tax, PMLA & Derivatives

India does not have a dedicated crypto law. Instead, it regulates crypto activity through two existing levers — taxation and anti-money-laundering rules — while a formal licensing framework, especially for derivatives, still does not exist. For an operator eyeing one of the world's largest crypto user bases, understanding that gap is the whole game. Here's how India's approach actually works.

Regulation by tax, not by license

India's most concrete crypto rules are tax rules. Since the Finance Act 2022, income from transferring a Virtual Digital Asset (VDA) is taxed at a flat 30%, with no deduction for expenses and no offsetting of losses — plus a 1% tax deducted at source (TDS) on transfers above a threshold (ClearTax). This is a taxing regime, not a licensing one: it tells you how crypto gains are taxed, not who may legally operate an exchange.

Regulation by anti-money-laundering

The second lever is AML. In March 2023, India brought VDA-related activities under the Prevention of Money Laundering Act (PMLA), making crypto exchanges and intermediaries "reporting entities" that must run KYC/AML programs, maintain records, and report to the Financial Intelligence Unit (FIU-IND). Offshore platforms serving Indian users have been required to register with FIU-IND as well — the compliance net extends beyond domestic firms.

The derivatives gap

Here's the crux for a trading venue: India has no regulatory framework that permits crypto derivatives for retail residents, and domestic exchanges do not offer them (Global Legal Insights). Regulatory authority is itself unsettled — split informally across the central bank, the securities regulator, and the finance ministry, none of which has issued a crypto-derivatives licensing regime. Indians who trade crypto derivatives largely do so on offshore platforms, in a grey zone rather than a regulated market.

India in the global picture

India is a sharp contrast to jurisdictions that built explicit regimes — compare it against the frameworks in the Global Licensing Guide, or the offshore routes many operators use to serve grey-zone demand. It's also a case study in the broader dynamics of crypto in emerging markets, where demand often runs well ahead of regulation.

The takeaway

India regulates crypto by taxing it (30% plus a 1% TDS) and by folding it into anti-money-laundering law (PMLA and FIU-IND registration) — but it has not built a licensing regime, and crypto derivatives remain outside any domestic framework. For operators, India is high-demand and high-uncertainty: approach it as a legal grey zone, not a market you can straightforwardly license into.

Sources

1. Cryptocurrency taxation in India (30% + 1% TDS) — ClearTax
2. Blockchain & Cryptocurrency Laws — India — Global Legal Insights
3. Financial Intelligence Unit — India (FIU-IND) — FIU-IND

This is general information, not legal or tax advice. Indian crypto policy is evolving and fact-specific; obtain qualified Indian legal and tax counsel before acting. As of 2026.