India’s crypto landscape is progressing steadily, with the government fostering a compliant and transparent ecosystem. While cryptocurrencies aren’t yet recognized as legal tender, the introduction of a clear regulatory framework for exchanges signals a strong move toward legitimacy and investor protection

For investors and entrepreneurs, understanding what makes a crypto exchange compliant in India is crucial to avoid regulatory pitfalls and ensure safe trading.

This guide simplifies the essentials for crypto exchanges in India, drawing on the latest regulations, compliance mandates, and practical steps for users and operators.

The Legality of Crypto in India

Cryptocurrencies such as Bitcoin and Ethereum can be bought, sold, or held as investments in India, but they are not recognized as legal tender. This means you cannot use crypto to pay for goods and services as you would with rupees. 

The Reserve Bank of India (RBI) and the government have clarified that crypto is not banned. The focus, therefore, is on regulating the platforms (exchanges) that facilitate crypto trading, rather than the assets themselves.

Who Regulates Crypto Exchanges in India?

Crypto is overseen by the Ministry of Finance through the Financial Intelligence Unit – India (FIU-IND). This is a key body for registration and compliance under the Prevention of Money Laundering Act (PMLA).

What Makes a Crypto Exchange Compliant?

A crypto exchange is considered compliant in India if it meets the following requirements:

1. FIU-IND Registration

Since March 2023, all crypto exchanges operating in India must register with the Financial Intelligence Unit – India (FIU-IND). This registration brings exchanges under the purview of the PMLA, mandating strict anti-money laundering (AML) and counter-terror financing (CTF) controls.

Why it matters:

Operating without FIU-IND registration can lead to enforcement actions, including hefty fines or even shutdowns. Major global exchanges have faced penalties for non-compliance, and the FIU-IND is actively monitoring the sector for violations.

2. KYC and Enhanced Due Diligence

Exchanges must implement robust Know Your Customer (KYC) processes. This means verifying the identity of all users, updating KYC records regularly (at least every 18 months), and collecting additional details for accounts flagged as high-risk.

Recent update:
In April 2025, FIU-IND mandated all exchanges to redo KYC checks for users whose details are outdated, with a compliance deadline of June 30, 2025.

3. Compliance with PMLA and AML Norms

Exchanges must:

  • Monitor transactions for suspicious activity.
  • Report large or unusual transactions to FIU-IND.
  • Maintain records for a prescribed period.
  • Deduct and report Tax Deducted at Source (TDS) on transactions.

4. Tax Compliance

Crypto exchanges must comply with India’s crypto tax regime:

  • 30% tax on profits from crypto trading.
  • 1% TDS on all crypto transactions above ₹10,000 per transaction or ₹50,000 per year.
  • Mandatory reporting of all crypto transactions and user details to tax authorities, starting FY 2025-26.

GST:
Exchanges may also be liable for Goods and Services Tax (GST) at 18% on transaction fees or commissions.

5. Security and User Protection

Exchanges are expected to implement strong cybersecurity protocols, insurance for user funds, and transparent dispute resolution mechanisms. This is critical for building trust and avoiding regulatory scrutiny.

Why FIU-IND Compliance is Non-Negotiable

FIU-IND registration is the single most important marker of a compliant exchange in India. It ensures that the exchange:

  • Follows strict KYC/AML protocols.
  • Reports suspicious transactions.
  • Deducts and remits TDS.
  • Is subject to regular audits and inspections.

Using a non-compliant exchange exposes users to risks such as:

  • Account freezes or loss of funds.
  • Legal action or tax notices.
  • Exposure to scams or money laundering investigations.

How to Identify a Compliant Crypto Exchange in India

Before signing up, check for:

  • FIU-IND registration: Most compliant exchanges display their registration number on their website.
  • Clear KYC process: Expect to submit PAN, Aadhaar, and bank details.
  • Transparent tax deduction: The exchange should automatically deduct 1% TDS on transactions and provide tax reports.
  • Regular communication: Exchanges inform users about regulatory changes, KYC updates, and compliance requirements.

Risks of Using a Non-Compliant Exchange

  • Penalties: The government can impose fines or shut down the exchange.
  • Exposure: Users may be investigated for participating in unregulated activities.
  • No recourse: If funds are lost due to fraud or technical issues, recovery is unlikely.

Conclusion: The Path Forward

The compliant status of a crypto exchange in India hinges on robust regulatory compliance, especially FIU-IND registration, strict KYC and AML protocols, transparent tax practices, and a commitment to user security. Choosing a platform that meets these standards ensures your investments remain safe, compliant, and future-ready in an evolving regulatory landscape.

Mudrex offers all these assurances.
As a fully FIU-IND compliant platform, Mudrex stands out for its transparent KYC process, strong security protocols, and seamless tax reporting features. 

With over 650 cryptocurrencies, curated investment baskets, and insured funds, Mudrex makes crypto investing accessible and secure for everyone-from beginners to experienced investors. 

If you’re looking for a secure, trusted, and user-friendly crypto exchange in India, Mudrex is a top choice.

FAQs

1. Is trading cryptocurrency legal in India?
Yes, trading crypto is legal in India if you use an exchange registered with FIU-IND and compliant with Indian regulations.

2. What is FIU-IND registration, and why is it important?
FIU-IND registration ensures the exchange follows anti-money laundering laws and government compliance, making your transactions safer and legal.

3. Do I have to pay tax on my crypto trades?
Yes, profits from crypto trading are taxed at 30%, and a 1% TDS is deducted on every transaction above the threshold.

4. Can I use international crypto exchanges in India?
Only if they are registered with FIU-IND; otherwise, you risk penalties.

5. How do I know if a crypto exchange is compliant in India?
Check if the exchange is FIU-IND registered, follows KYC procedures, and deducts TDS on trades. This information is usually available on their website.

Disclaimer:

This article contains sponsored content that may not reflect the independent opinion or views of FinancialExpress.com. Further, FinancialExpress.com cannot be held responsible for the accuracy of any information presented here. Please consult a certified financial advisor before making any decisions based on this article.