The legality of Bitcoin and other culprits remains ambiguous and constantly evolving in India. The Indian government keeps its options open about cryptocurrencies and has not declared them illegal, thus not giving them legal tender status; however, here is an insight into the new rules, the current state of affairs, and what budding investors should keep in mind.
Current Legal Status
Bitcoin and other cryptocurrencies can be bought, sold, and traded in exchanges in India and are not considered legal tender. In terms of routine transactions in daily life, they are not usable currencies like money that may be used to buy goods and services. The Reserve Bank of India (RBI) has clearly stated that cryptocurrencies are not government-backed and that users engage at their own risk.
The regulation framework will undergo drastic changes in the years to come. In 2018, the RBI imposed a blanket ban on banks from aiding in any transactions concerning cryptocurrencies. However, in 2020, the Supreme Court of India quashed this ban, allowing the resumption of banking for crypto exchanges and their users.

Following this, the government introduced the Cryptocurrency and Regulation of Official Digital Currency Bill, which proposed a policy framework to prepare for adopting a central bank digital currency while trying to regulate or even ban private cryptocurrencies. Despite all this, the bill is still being discussed; nothing seems to have progressed.
One of the critical points of regulation in India on cryptocurrencies is the introduction of one in the year 2022. Cryptocurrencies have been officially defined as Virtual Digital Assets (VDAs), and a flat 30% tax on the profits arising from the trading or selling of these assets was introduced.
A 1% Tax Deducted at Source (TDS) applies to all transactions beyond certain limits, such as ₹50,000 per year for most individuals. By doing this, the government aims to bring transparency into the sector and generate revenues while not encouraging speculative trading.
Despite these reforms, grave concerns remain about misuse, such as money laundering, tax evasion, and financing of other illegal activities using cryptocurrencies. Besides, assets such as Bitcoin are the most volatile and could be the riskiest of investments.
The government is also concerned about risks posed to monetary stability by private cryptocurrencies. In this context, the RBI is focusing on promoting its IT-backed digital currency, CBDC, which introduces a regulated alternative to decentralized digital currencies.
Since this is a sensitive issue for Indian investors, one must consider the regulatory landscape. They should work with more established and well-reputed exchanges to avoid unnecessary risks in buying and selling cryptocurrencies.
To circumvent complications, it is also important to understand the tax on cryptocurrencies, which is 30% income tax and 1% TDS. They should also keep track of various decrees on regulatory checkpoints, as they change quite rapidly.
While Bitcoin and other cryptocurrencies are not declared illegal in India, they fall under non-legal tender. This categorization underscores the importance of the risks and regulations regarding digital asset investment.
As the government develops a comprehensive policy, individuals or businesses must be careful to comply with existing laws governing crypto trading without exposing themselves to civil or criminal liabilities.