Can Businesses in India Accept Crypto Legally in 2025?

Can a business in India legally accept Bitcoin or Ethereum as payment for goods or services? The short answer is: no. But the full picture is far more complicated - and it’s changing fast.

What’s Actually Allowed?

Cryptocurrency isn’t banned in India. You can buy, sell, hold, and trade it. But using it to pay for your coffee, your website design, or your monthly rent? That’s not permitted. The government treats crypto as a Virtual Digital Asset (VDA), not money. That distinction matters. It means crypto can be owned like gold or stocks, but it can’t be used like rupees.

This isn’t a gray area anymore - it’s a clearly defined boundary. The Income Tax Department, the Financial Intelligence Unit (FIU-IND), and the Reserve Bank of India all agree on one thing: crypto isn’t legal tender. So even if a customer offers you 0.5 BTC for your product, accepting it as payment puts you at legal risk.

What Can You Legally Do With Crypto?

You’re not out of options. Many businesses operate legally in India’s crypto space - just not as payment processors. Here’s what’s allowed:

• Running a crypto exchange platform
• Offering crypto trading or investment advice
• Developing blockchain applications or smart contracts
• Providing crypto education or consulting services
• Accepting crypto as payment for your own services - like a developer getting paid in ETH for building an app

The key difference? You’re not selling goods or services for crypto. You’re offering expertise, technology, or access to crypto markets - and getting paid in crypto as part of a service agreement. That’s legal. Selling a T-shirt for Bitcoin? Not allowed.

Strict Tax Rules - No Exceptions

If you’re trading or holding crypto, the tax rules are harsh - and non-negotiable. Since April 2022, all income from crypto transactions is taxed at a flat 30%, with no deductions for losses, transaction fees, or gas costs. On top of that, there’s a 4% cess. That’s 31.2% total.

But the real punch comes from the 1% Tax Deducted at Source (TDS). Every time crypto moves - whether you’re selling, swapping, or transferring to a wallet - 1% gets withheld by the platform or exchange. If you’re a business making crypto payments, you’re responsible for collecting and remitting this tax. That means your cash flow takes an instant hit. A ₹100,000 crypto sale? You get ₹99,000. The rest goes to the government.

No one’s exempt. Even small-time traders and startups must comply. The Income Tax Department uses blockchain analytics to track transactions. If your wallet shows repeated crypto inflows and you haven’t filed taxes, you’ll get a notice. Penalties can include fines up to 200% of the tax due.

Know Your Customer (KYC) and Anti-Money Laundering (AML) Rules

Since March 2023, any business involved in crypto - even if you’re just hosting a wallet for clients - must register with FIU-IND. This isn’t optional. It’s mandatory. You need to collect full KYC documents from every user: ID proof, address proof, PAN card, and source of funds.

You also have to monitor transactions. If someone sends you ₹50,000 in crypto from a new wallet, then immediately swaps it to another coin and withdraws - that’s a red flag. You’re required to report it. The FIU-IND uses AI-driven systems to detect patterns. Failure to report can mean fines of over ₹1 crore.

Binance and Bybit were fined over ₹28 crore combined in 2024 for missing KYC checks. Both companies had to shut down operations in India for months until they fully complied. If you’re a small business, you can’t afford that kind of risk.

The Travel Rule - India’s Hardest Crypto Rule

India is one of the only countries in the world that enforces the FATF Travel Rule with no minimum threshold. That means every single crypto transfer - even ₹100 - must include sender and receiver details: full name, address, wallet ID, and transaction purpose.

If you’re a business accepting crypto (even if it’s for services), you need to log every transaction with this data. Most standard wallets don’t do this. You’ll need specialized software, which can cost ₹50,000-₹2 lakh per year. For a small shop or freelancer, that’s a major barrier.

What’s Coming? The COINS Act 2025

The government is working on the Comprehensive Regulation of Cryptographic Assets (COINS) Act. If passed, it could change everything.

The proposed law would:

• Formally recognize crypto as a legal asset class
• Require all exchanges to get licensed by the RBI
• Allow businesses to accept crypto as payment under strict conditions
• Introduce deductions for trading fees and clarify TDS rules
• Create consumer protection rules against scams and rug pulls

This isn’t a fantasy. It’s modeled after Europe’s MiCA regulation and Japan’s balanced approach. Experts believe the COINS Act could pass by mid-2026. But until then, businesses must operate under today’s rules - not tomorrow’s hopes.

Banking Is Still a Nightmare

Even if you’re fully compliant, getting a bank account is hard. Most Indian banks still treat crypto businesses as high-risk. You might get rejected for a current account, or have your account frozen without warning.

Some fintechs and neo-banks are starting to serve crypto firms - but they charge higher fees and impose strict limits. You’ll need to maintain a paper trail of every transaction, tax filing, and KYC record. One mistake, and your banking access could vanish overnight.

Real-World Example: A Delhi-Based Web Agency

A web development firm in Delhi started accepting crypto payments in 2023. They thought it was fine - after all, crypto was legal to own. But when a client paid ₹8 lakh in USDT for a website, the agency didn’t report the TDS. The Income Tax Department flagged the transaction. Within six months, they were fined ₹2.4 lakh, had to pay ₹2.1 lakh in back taxes, and lost their bank account.

They switched to accepting only INR. Now they use crypto only for their own investments - never as payment. They say: “We love crypto. But we’re not risking our business over it.”

What Should You Do?

If you’re a business owner in India:

• Don’t accept crypto as payment for goods or services - it’s illegal.
• Register with FIU-IND if you’re involved in crypto trading or services.
• Track every transaction and report 1% TDS.
• File taxes at 30% + 4% cess - no exceptions.
• Keep KYC records for every user or client.
• Prepare for change - the COINS Act could come anytime.

The safest path? Use crypto as an investment or a service revenue stream - not as a payment tool. The rules are clear. The penalties are real. And the government isn’t backing down.

What’s Next?

India’s crypto future isn’t about banning it - it’s about controlling it. The RBI is pushing its own digital rupee (e-Rupee) as the official digital currency. Private crypto? It’s being pushed into a tightly regulated corner.

Businesses that adapt - by focusing on compliance, transparency, and legal boundaries - will survive. Those that try to bypass the rules? They’ll get caught.

The message from regulators is simple: You can play in this space. But you play by our rules.