Are Crypto Payments Allowed in India? What You Need to Know in 2026

Can you use Bitcoin or Ethereum to pay for your coffee, groceries, or online services in India? The short answer is no. As of 2026, cryptocurrency payments for goods and services are explicitly banned in India-even though buying, selling, and holding crypto is still legal. This isn’t a full ban on crypto. It’s a targeted restriction: you can trade it, but you can’t spend it.

Why Can’t You Use Crypto to Pay in India?

The Indian government doesn’t treat cryptocurrencies as money. They’re classified as Virtual Digital Assets (VDAs) a category defined under Section 2(47A) of the Income Tax Act, 1961. That means they’re treated like stocks or gold, not like rupees. You can own them. You can profit from them. But you can’t use them to settle a bill.

This distinction matters. If you try to pay a restaurant with Bitcoin, the business could face legal trouble. The government’s stance is clear: only the Indian Rupee (INR) is legal tender. Even if both parties agree to use crypto, the law doesn’t recognize it as a valid payment method. This rule applies to all private cryptocurrencies-Bitcoin, Ethereum, Solana, Dogecoin, and others.

Why does India take this approach? The Reserve Bank of India (RBI) has long warned that crypto payments could destabilize the financial system. They fear unregulated transactions could fuel tax evasion, money laundering, and capital flight. The government also doesn’t want to lose control over monetary policy. When people start paying with Bitcoin, it weakens the RBI’s ability to manage inflation, interest rates, and currency supply.

What About Trading Crypto? Is That Still Legal?

Yes. Trading cryptocurrencies is legal in India-but under strict rules. You can buy, sell, and hold Bitcoin, Ethereum, or any other coin on registered exchanges. But you can’t just use any platform. Only exchanges registered with the Financial Intelligence Unit of India (FIU-IND) the country’s anti-money laundering watchdog are allowed to operate. Platforms like WazirX, CoinDCX, and ZebPay are registered. International exchanges like Binance and Bybit were fined millions in 2024 for non-compliance but later got registered after tightening their KYC and reporting systems.

If you’re trading crypto, you’re not just a user-you’re a taxpayer. Since 2022, all crypto gains are taxed at a flat 30%, with no deductions allowed. That means if you bought Ethereum for ₹2,00,000 and sold it for ₹5,00,000, you pay ₹90,000 in tax on the ₹3,00,000 profit. Even if you lost money on other trades, you can’t offset those losses against your gains. This is stricter than how stocks or real estate are taxed.

There’s also a 1% TDS (Tax Deducted at Source) on every crypto trade over ₹50,000. That’s automatically taken out by the exchange. And if you’re paying platform fees-like trading fees or withdrawal charges-you’re now paying an 18% GST on those too. That’s something many users didn’t expect when they started trading.

How Is the Government Monitoring Crypto?

India’s crypto scene is under heavy surveillance. Every exchange must collect your ID, address, and bank details through Know Your Customer (KYC) a mandatory verification process under the Prevention of Money Laundering Act, 2002. All transactions are tracked, and exchanges must report large or suspicious activity to FIU-IND.

Failure to comply isn’t taken lightly. Binance was fined ₹18.82 crore in 2024 for not reporting user data. Bybit got hit with ₹9.27 crore. Both had to shut down operations temporarily until they fixed their systems. The government isn’t trying to scare people away-it’s forcing transparency. If you’re trading, you’re leaving a digital trail.

And it doesn’t stop there. When you file your income tax return, you must declare crypto gains using Schedule VDA a specific form within ITR-2 or ITR-3 for Virtual Digital Assets. If you skip this, your entire tax filing could be flagged. The Income Tax Department has been cross-checking bank statements with exchange records. Many users have received notices simply because they didn’t report small trades.

What’s the Alternative? The Digital Rupee

While private crypto is restricted, India is aggressively pushing its own digital currency: the Central Bank Digital Currency (CBDC) also known as the digital rupee. Unlike Bitcoin, the digital rupee is issued by the RBI and works just like physical cash-but in digital form. It’s backed by the government. It’s legal tender. And it’s designed to replace cash, not compete with crypto.

The RBI launched pilot programs in late 2022 and expanded them across major cities by 2025. Banks, retailers, and even public transport systems are testing it. You can use it to pay for metro rides, buy groceries, or send money to someone without a bank account. It’s faster than UPI, cheaper than card payments, and fully traceable by the government.

Why is the government pushing this? Because it gives them control. With the digital rupee, they can track every transaction, apply interest rates on digital cash, or even restrict spending in certain sectors. It’s not about freedom-it’s about oversight. And for many Indians, especially in rural areas, it’s a better alternative than crypto: no volatility, no taxes on transfers, and no regulatory gray zones.

What Happens If You Try to Use Crypto as Payment?

Some businesses still accept crypto informally. A few online sellers, freelancers, or tech startups might take Bitcoin in exchange for services. But here’s the catch: if the government finds out, both parties could be in trouble.

The buyer might get hit with a tax notice for unreported income. The seller could be accused of evading GST or violating PMLA rules. Even if the transaction was between friends, if it crosses ₹50,000, TDS applies-and if it’s not reported, it’s a red flag.

There’s no clear penalty for using crypto as payment, because it’s so rare. But the law is unambiguous: it’s prohibited. Authorities have the power to freeze accounts, seize assets, and even initiate criminal proceedings under anti-money laundering laws if they suspect intentional evasion.

Is There Any Hope for Change?

There’s no sign the government will lift the ban on crypto payments anytime soon. The 2025 Finance Bill proposed a full ban on private cryptocurrencies, but it hasn’t been tabled in Parliament yet. That doesn’t mean it’s dead-it’s just delayed. The RBI and Finance Ministry still view crypto as a threat. SEBI, on the other hand, has suggested a more open approach-treating crypto like securities and regulating it through existing market frameworks.

What’s likely to happen? Crypto will remain a high-tax investment asset, not a payment tool. The digital rupee will grow. More people will use it for daily transactions. And private crypto will continue to exist in the shadows-used for trading, not spending.

For now, if you want to use digital money to pay for things in India, the only legal option is the digital rupee. Everything else? Stick to trading. Don’t try to buy a phone with Ethereum. The law won’t let you.