Are Crypto Payments Allowed in India? What You Can and Can't Do in 2025

Can you use Bitcoin or Ethereum to pay for groceries, rent, or a ride in India? The short answer is no. As of 2025, using cryptocurrencies to pay for goods or services is explicitly illegal in India. But here’s the twist: buying, selling, and holding crypto is still perfectly legal. The government didn’t ban crypto-it just drew a hard line at using it as money.

Why Can’t You Pay With Crypto in India?

India doesn’t treat cryptocurrencies like the Indian Rupee. They’re not legal tender. That means no business, online store, or street vendor is allowed to accept Bitcoin, Dogecoin, or any other crypto as payment. Even if you and the seller agree to it, the law doesn’t recognize the transaction as valid. This isn’t about distrust in the tech-it’s about control. The government wants to keep financial transactions traceable, taxable, and tied to the rupee.

The legal basis comes from the Income Tax Act, where crypto is classified as a Virtual Digital Asset (VDA). That label tells you everything: crypto is treated like a stock or gold, not cash. You can own it, trade it, even hold it for years-but you can’t spend it like rupees.

What You Can Do With Crypto in India

Even though you can’t pay with it, crypto is far from dead in India. Millions still trade it. Exchanges like WazirX, CoinSwitch Kuber, and ZebPay are still operating, and they’re not shady backrooms-they’re registered with the Financial Intelligence Unit (FIU-IND). To stay legal, they must follow strict rules:

• Know Your Customer (KYC) checks for every user
• Report all transactions over ₹50,000
• Keep records for at least 7 years
• Pay taxes on every profit

You can buy Bitcoin with your bank account. You can sell Ethereum and withdraw INR. You can even hold it as an investment. But if you try to use it to buy a phone on Amazon India or pay your electric bill? That’s where you cross the line.

How the Tax System Works (It’s Harsh)

The government didn’t just ban crypto payments-they made sure trading comes with a heavy price tag. Since 2022, every profit from crypto is taxed at a flat 30%. No deductions. No offsetting losses. If you bought Bitcoin at ₹500,000 and sold it at ₹700,000, you owe ₹60,000 in tax on the ₹200,000 gain. That’s it. No expense write-offs, no capital loss carryforwards.

On top of that, there’s a 1% Tax Deducted at Source (TDS) on every trade over ₹50,000. So if you sell ₹100,000 worth of crypto, ₹1,000 gets taken out before you even see the money. And if the exchange charges you a fee? That fee is now subject to 18% GST.

You must report all crypto activity in your income tax return using Schedule VDA in ITR-2 or ITR-3. Missing this can trigger notices, penalties, or even your entire return being rejected. Many traders have lost refunds simply because they forgot to file this one form.

Who’s Watching? The Regulators

India doesn’t have one crypto regulator-it has three, and they don’t always agree.

The Reserve Bank of India (RBI) still calls crypto a threat to financial stability. They’ve been pushing their own digital currency, the digital rupee (e₹), since 2022. Unlike Bitcoin, the digital rupee is issued by the RBI, backed by the government, and fully traceable. It’s meant to replace cash and reduce reliance on private crypto.

The Ministry of Finance handles the tax rules and drafted a bill to ban private cryptocurrencies. That bill has been sitting in Parliament since 2023, never introduced. Why? Because the government isn’t sure if it wants to ban crypto entirely or just control it.

Meanwhile, SEBI-the stock market regulator-has quietly signaled it’s open to regulating crypto like securities. They’ve suggested crypto exchanges should be licensed and supervised like brokers. That could mean a future where crypto trading is allowed, but only under strict, government-approved platforms.

The FIU-IND has already fined big names. Binance paid ₹18.8 crore. Bybit paid ₹9.2 crore. Both were fined for failing to report suspicious transactions. Now, both are registered. That’s the message: comply, or pay.

What Happens If You Try to Pay With Crypto Anyway?

Let’s say you find a local shop owner willing to take Bitcoin for your monthly rent. You send the coins. They cash out on WazirX. Sounds harmless, right?

It’s not.

The shop owner is now liable for 30% tax on the value of the Bitcoin they received. If they didn’t report it, they’re hiding income. That’s tax evasion. You, as the payer, are facilitating an illegal transaction. Both parties could face penalties, interest, or even criminal charges under the Prevention of Money Laundering Act.

Even if you use a peer-to-peer app like Paxful to pay someone, the transaction leaves a digital trail. Exchanges report to FIU-IND. Banks flag unusual activity. The system isn’t perfect-but it’s watching.

The Future: Digital Rupee vs. Crypto

India’s real play isn’t banning crypto-it’s replacing it. The digital rupee (e₹) is being tested in cities like Mumbai, Delhi, and Bengaluru. It works like a mobile wallet, but it’s issued by the RBI. You can send it instantly. You can pay for bus tickets, groceries, or bills. And the government knows exactly who sent what, when, and why.

Unlike crypto, the digital rupee doesn’t have volatility. No 50% crashes. No anonymous wallets. No offshore exchanges. It’s designed to give users the speed and convenience of crypto-with total control for the state.

Experts believe the digital rupee will become the default digital payment method in India within the next 3-5 years. That’s why the government is so strict about private crypto payments. They’re not trying to crush innovation-they’re trying to own it.

Bottom Line: Trade, Don’t Spend

Crypto in India today is a paradox. It’s legal to own. It’s illegal to use. It’s taxed like a lottery win. And it’s being slowly replaced by a government-backed alternative.

If you’re in India and want to hold crypto? Go ahead. But treat it like stocks or gold-not spending money. If you want to pay for things? Use rupees. Use UPI. Use the digital rupee when it rolls out.

The rules won’t change overnight. But they will change. And if you’re waiting for crypto to become legal tender here, you’ll be waiting a long time. The future of money in India isn’t decentralized. It’s digital. And it’s controlled.