Mining Crypto in India: Legal Rules and Strict Restrictions in 2025

Miners in India aren’t breaking the law - but they’re walking a tightrope with no safety net. There’s no official ban on crypto mining, yet the government has built a system that makes it nearly impossible to do it legally and profitably. If you’re mining Bitcoin, Ethereum, or any other coin in India in 2025, you’re dealing with a 30% tax on every rupee you earn, no deductions for your electricity bill, and a government that’s watching your every transaction.

There’s No Law Against Mining - But There’s a Tax That Kills It

The Indian government doesn’t say you can’t mine cryptocurrency. But it doesn’t need to. The tax code does the job for them. Under the Virtual Digital Asset (VDA) rules introduced in 2022 and updated through 2025, any cryptocurrency you mine is treated as taxable income. And the tax rate? A flat 30%, plus a 4% cess. That’s higher than the top marginal income tax rate for most salaried workers.

Here’s the kicker: you can’t deduct anything. Not your ASIC miners. Not your power bill. Not your cooling system. Not even the pool fees you pay to join a mining group. The only cost you’re allowed to subtract is the price you paid to buy the coins - which doesn’t apply if you mined them. So if you spend ₹5 lakh on equipment and ₹2 lakh on electricity to mine ₹10 lakh worth of Bitcoin, the government taxes you on the full ₹10 lakh. Your net profit? Zero. Your tax bill? ₹3.12 lakh.

Add to that a 1% Tax Deducted at Source (TDS) on every crypto transaction - including when you sell your mined coins to pay your electricity bill. That’s another ₹10,000 gone before you even see your earnings. And if you use an exchange like Bybit or CoinDCX to convert your mining rewards to INR, you now pay 18% GST on the service fee. That’s three layers of tax on one activity: 30% income tax, 1% TDS, and 18% GST.

Who’s Watching You? Five Agencies, One Target

You’re not just dealing with the taxman. You’re under surveillance from five different government bodies, each with its own rules and penalties.

The Income Tax Department tracks your mining income through Schedule VDA in your annual tax return. You must report every coin you mine, the date, the value in INR at the time of receipt, and any TDS deducted. Miss a single entry? You could face a penalty of 50% to 200% of the tax due - and up to seven years in jail if they decide you’re hiding income.

The Financial Intelligence Unit (FIU-IND) monitors all crypto transactions under the Prevention of Money Laundering Act (PMLA). They’ve already fined Binance ₹18.8 crore and Bybit ₹9.27 crore for failing to report user data. Now they’re tracking 25 offshore exchanges used by Indian miners - platforms like Huione, Paxful, and BitMex - and demanding transaction logs from Indian residents.

The Reserve Bank of India (RBI) has never approved crypto mining, but it also hasn’t banned it. Instead, it issues public warnings every few months, reminding banks not to facilitate crypto-related transactions. Banks that do risk losing their license.

The Securities and Exchange Board of India (SEBI) started monitoring crypto tokens in April 2025 that resemble securities. If your mining rewards include tokens that act like shares - like staking rewards or governance tokens - SEBI may classify them as unregistered securities. That’s a whole new legal risk.

And then there’s Project Insight, NMS, and NUDGE - AI systems built by the tax department to automatically scan crypto wallets, exchange accounts, and blockchain data. These tools flag suspicious activity. If your wallet receives 10 BTC in one month and you’ve never filed a tax return, you’ll get a notice within days.

What You Must Keep - And Why It Doesn’t Matter

The government expects you to keep detailed records: purchase receipts for your mining rigs, electricity bills, pool fee invoices, wallet addresses, and timestamps of every mined block. You need to log the INR value of each coin at the moment it hits your wallet - based on exchange rates from CoinMarketCap or CoinGecko.

But here’s the irony: even if you keep perfect records, you can’t use them to reduce your tax. The law doesn’t allow deductions for operational costs. So your meticulous spreadsheets? They’re just for show. They don’t lower your bill. They only help the government prove you’re hiding income if you skip filing.

If you’re a hobbyist mining one or two coins a month on a home PC, you might think you’re invisible. You’re not. The AI systems flag even small, irregular deposits. If your wallet receives 0.005 BTC in January, 0.003 BTC in March, and 0.002 BTC in July - and you’ve never reported it - you’re already on the radar.

Why Mining Is Dying in India - And Where It’s Going

In 2020, India had an estimated 50,000 active crypto miners. By 2025, that number is below 12,000. Most of those left are either using cheap hydro power in remote areas or running small rigs as side projects. Large-scale mining farms? Nearly gone.

Why? Because the math doesn’t work. In Kazakhstan or Texas, miners break even because they deduct electricity, hardware depreciation, and cooling costs. In India, you can’t. Even with subsidized power, the tax burden makes mining unprofitable. One miner in Chhattisgarh told a local news outlet he was paying ₹1.2 lakh in taxes for ₹80,000 in mining rewards. He shut down.

The result? Mining is going underground - or offshore. Many Indian miners now operate through foreign pools in Georgia, Kazakhstan, or Canada. They use VPNs, offshore wallets, and peer-to-peer exchanges to avoid detection. But that’s risky. If FIU-IND links your Indian bank account to an offshore wallet, you’re looking at a money laundering investigation.

The government knows this is happening. That’s why they’re pushing for the OECD’s Crypto-Asset Reporting Framework (CARF) by 2027. Once adopted, Indian tax authorities will automatically receive data from foreign exchanges and mining pools. Your offshore mining won’t be hidden anymore.

The Future: More Rules, More Uncertainty

The government hasn’t given up. In June 2025, it released a discussion paper proposing a full regulatory framework for crypto - including mining. It asked for public feedback on whether mining should be licensed, taxed differently, or outright banned.

The options on the table:

• License all mining operations (like telecom providers)
• Require mining equipment to be imported only through approved channels
• Cap electricity usage for crypto mining in high-demand states
• Introduce a separate mining tax based on hash rate, not income
• Ban all crypto mining entirely

Right now, no decision has been made. But the tone is clear: the government wants control, not innovation.

Meanwhile, the Income Tax (No. 2) Bill, 2025, which replaced the old Income Tax Act, expanded the definition of VDAs to include NFTs and undisclosed income. That means if you mine an NFT and later sell it - even if you didn’t know it was a VDA - you owe tax. And if you didn’t report it? You’re in trouble.

What Should You Do If You’re Mining Right Now?

If you’re mining crypto in India in 2025, here’s your reality check:

1. File your taxes - even if you think you lost money. Not filing is a bigger risk than paying tax.
2. Report everything - every coin, every date, every value. Use Schedule VDA in your ITR.
3. Keep records - not because they help you, but because they prove you’re not hiding anything.
4. Don’t use Indian exchanges - they report to FIU-IND. Use offshore platforms with caution.
5. Don’t assume you’re safe - AI is watching. Your bank account is linked to your digital wallet.

There’s no legal way to mine crypto profitably in India today. The system is designed to discourage it. If you’re doing it for fun, fine. If you’re doing it to make money - you’re losing. And the government knows it.

Is There Any Hope for Change?

Some industry groups are pushing for reform. They argue that mining creates jobs, attracts tech investment, and uses surplus renewable energy. But the government isn’t listening. Their priority isn’t innovation - it’s control.

The only real hope is if the Supreme Court steps in again. In 2020, it overturned the RBI’s crypto ban. But it also made it clear: Parliament can ban crypto anytime. And with the Finance Ministry now pushing for tighter rules, that day might come sooner than expected.

For now, miners in India are stuck in limbo. No ban. No protection. Just a tax code that turns every mined coin into a liability.