Overview
India has no dedicated crypto-asset licensing regime. Virtual Digital Asset Service Providers (VDA SPs) are regulated through three overlapping frameworks: PMLA Reporting Entity registration with FIU-IND, the punitive VDA tax regime under the Income-tax Act, and contingent SEBI or RBI oversight when securities or banking are touched. The Cryptocurrency and Regulation of Official Digital Currency Bill listed in 2021–2022 was never tabled and has effectively been withdrawn. The 2026 Asset Tokenisation (Regulation) Bill in the Rajya Sabha is a private member's bill, unlikely to pass in current form.
The practical entry path is therefore narrow: register with FIU-IND, comply with PMLA AML duties, and run the 30% / 1% TDS tax stack. Capital is unconstrained by statute, but the Tax Deducted at Source on every transfer compresses working-capital cycles for high-frequency exchanges.
Regulators
FIU-IND (Financial Intelligence Unit – India) sits within the Ministry of Finance Department of Revenue and supervises AML/CFT compliance. The Central Board of Direct Taxes and the Central Board of Indirect Taxes and Customs handle VDA tax and GST respectively. The Department of Economic Affairs in the Ministry of Finance is the policy lead. SEBI applies only where a token meets the SCRA 1956 definition of securities — rare for pure exchange tokens. The Reserve Bank of India retains a hostile stance on private crypto and has no crypto-licensing role; it does operate the Digital Rupee (e₹) wholesale pilot since 1 November 2022 and the retail pilot since 1 December 2022.
Track 1 — PMLA Reporting Entity registration with FIU-IND
The Ministry of Finance gazette S.O. 1072(E), issued under section 2(1)(sa)(vi) of the PMLA on 7 March 2023, classified VDA-related activities as Reporting Entities under PMLA. Activities in scope:
- Exchange between VDAs and fiat;
- Exchange between VDA and VDA;
- Transfer of VDAs;
- Safekeeping or administration of VDAs or instruments enabling control over VDAs;
- Participation in and provision of financial services related to VDA issuer offers and sales.
The notification is activity-based, not presence-based: an offshore exchange serving Indian users is captured regardless of physical presence in India. Registration is filed on the FIU-IND FINgate 2.0 portal; no government fee is publicly disclosed.
Core obligations
- Appointment of a Principal Officer (PO) at senior-management level responsible for AML compliance.
- Appointment of a Designated Director (DD) at board level, with PMLA accountability.
- KYC and client due diligence under PMLA Rules 2005.
- Transaction monitoring; STR, CTR, NTR and CBWTR filings.
- Record-keeping for a minimum of five years.
- Annual AML/CFT compliance confirmations and independent audits.
Track 2 — VDA tax regime under the Income-tax Act
The Finance Act 2022 introduced a punitive flat-rate regime for VDAs, retained without change in the Union Budget 2026.
| Provision | Effect |
|---|---|
| Section 115BBH | Flat 30% tax on income from transfer of any VDA. No deduction except cost of acquisition. No set-off or carry-forward of losses. Plus 4% health and education cess. |
| Section 194S | 1% TDS on consideration for transfer of a VDA to a resident, effective 1 July 2022. Thresholds: INR 50,000 per year (specified persons) or INR 10,000 per year (others). |
| Schedule VDA | Dedicated crypto reporting in ITR-2 / ITR-3. |
| GST on exchange services | 18% under CGST/SGST Acts; no exemption. |
India is also progressively bringing VDA providers into the FATCA / CRS / CARF international reporting framework.
Track 3 — SEBI and RBI
SEBI applies only where a token meets the SCRA 1956 definition of securities, which is rare for pure exchange tokens. RBI runs the Digital Rupee CBDC and periodically reiterates a preference for banning private crypto, but operates no crypto licence. There is currently no government-sponsored bill to create one.
High-level checklist (FIU-IND Reporting Entity)
- Indian private limited company under the Companies Act 2013 or registered branch of a foreign company. Pure offshore entities can also register as Reporting Entities on an activity basis without a local subsidiary.
- Appoint a Principal Officer and a Designated Director.
- Draft an AML/CFT programme aligned with PMLA Rules 2005 and FIU-IND AML/CFT guidelines 2026.
- Build KYC, EDD, transaction-monitoring and reporting workflows for STR, CTR, NTR and CBWTR.
- Implement record-keeping for five years (encrypted at rest, India-resident or RE-controlled).
- File on FINgate 2.0 with company documents, principals' KYC and AML programme.
- Respond to FIU-IND clarification rounds and KYC of principals.
- Post-registration: annual independent audit, ongoing reporting.
Process and timeline
| Step | FIU-IND registration |
|---|---|
| Entity set-up plus PO and DD appointment | 4–8 weeks |
| Policy drafting (AML programme, risk assessment) | 4–6 weeks |
| FINgate 2.0 application preparation | 1–2 weeks |
| FIU-IND review and KYC of principals | 6–12 weeks |
| Total realistic | 3–5 months |
Offshore applicants face longer timelines with additional undertakings and, where applicable, penalty-settlement workstreams.
Enforcement record
- December 2023 — FIU-IND issued show-cause notices to nine offshore exchanges (Binance, Kraken, KuCoin, Huobi, Gate.io, Bittrex, Bitfinex, MEXC, Bitstamp); MeitY IP-blocked non-compliant sites.
- 2024 — Binance and KuCoin re-registered after penalty settlement.
- March 2025 — 49 VDA SPs registered with FIU-IND (45 onshore, 4 offshore).
- Late 2025 — FIU-IND issued section 13 PMLA notices to a further 25 offshore VDA SPs for non-compliance.
- 1 February 2026 — Union Budget 2026 retained the VDA tax framework unchanged.
FAQ
Is there a crypto licence in India?
No dedicated crypto licence. The compulsory step is FIU-IND Reporting Entity registration under PMLA section 2(1)(sa)(vi).
What is the minimum capital?
None. Statutory minimum paid-up capital is zero. The economic floor is set by the AML programme, PO/DD hires, and the 1% TDS liquidity drag.
Are offshore exchanges captured?
Yes. The gazette is activity-based — any VDA service provider serving Indian users falls in scope regardless of physical presence.
How does the 1% TDS work in practice?
Section 194S requires the payer to deduct 1% of consideration on transfer of a VDA to a resident. For exchanges this means deduction on every trade above the threshold and remittance to the tax authority, which materially affects working-capital cycles for high-frequency books.
How does India compare with the rest of the region?
India is the cheapest and fastest registration in APAC alongside New Zealand and Labuan. The trade-off is the 30% / 1% TDS stack, which is the highest effective tax burden in the region.