RBI e-Rupee Explained: What Is It, How to Use It, and What You Must Know About Tax Implications

Updated: 30-06-2025, 02.37 PM

The Reserve Bank of India’s digital currency, known as the e-rupee (e₹), has rapidly evolved from a pilot project to a widely adopted digital legal tender. First introduced in December 2022, the e₹ has now crossed a valuation milestone of ₹1,000 crore in circulation by March 2025, according to RBI’s latest annual report. This represents a sharp rise from ₹234 crore in 2024 and just ₹16 crore in 2023, showing the rising popularity of India’s Central Bank Digital Currency (CBDC).

e-Rupee

From Pilot to Nationwide Rollout

Initially rolled out in two stages—wholesale (for institutional use) and retail (for the public)—the e-rupee is now accessible across India. The retail segment has seen explosive growth, with over 60 lakh users by March 2025 and 17 leading banks facilitating its distribution.

The two models of e₹ include:

Wholesale CBDC (e₹-W): Primarily used for interbank settlements and government bond transactions.
Retail CBDC (e₹-R): Designed for everyday public transactions like shopping, bill payments, or peer-to-peer transfers.

What Exactly is the e-Rupee?

The e-rupee is digital currency issued directly by the Reserve Bank of India. While it behaves like physical cash, it exists purely in digital form and offers the trust and finality of legal tender.

Key Features of e₹:

Functions like cash, but digitally
Issued and regulated by the RBI
Can be stored in a mobile wallet
Does not require a bank account for use
Offers a certain level of anonymity, similar to physical currency
Does not earn interest like savings in a bank account
Distributed through participating banks

Importantly, the e₹ is a token-based system, meaning ownership is transferred during transactions rather than balances being updated in accounts—closely resembling how physical currency changes hands.

Is e₹ Taxable?

In terms of income tax and GST, e-rupee is not considered a capital asset or a virtual digital asset under Sections 2(14) and 2(47A) of the Income Tax Act. Hence:

No income tax or capital gains tax applies to holding or spending e₹
No GST is levied on the use of e₹ as it is a form of currency and not a product or service

However, some legal grey areas remain.

Tax Ambiguity in High-Value Transactions

While the RBI treats e₹ as digital cash, current tax laws may not fully recognize it as a digital payment method like NEFT or UPI. According to tax expert Mayank Mohanka, this could create legal complications in high-value transactions.

For example:

Certain transactions (like real estate or business expenses) attract penalties if done in cash above specified limits.
If such transactions are done using e₹, and the Income Tax Department does not treat it as a digital mode, there may be a risk of penalty under cash payment rules.

Until formal recognition of e₹ is embedded in the Income Tax Act as a digital payment method, users should exercise caution in using it for high-value payments.

How to Use e₹ Today

Download the e₹ app or wallet provided by your bank (currently 17 banks offer this, including SBI, ICICI, HDFC).
Add e₹ to your wallet using your linked bank account.
Use it for P2P transfers, QR-based merchant payments, or shopping online and offline—just like UPI or cards.

No bank account is required to receive or store e₹ once it’s in your wallet.

The Road Ahead

The RBI is pushing for greater adoption of the e₹, aiming to make it a preferred mode for secure, private, and convenient digital transactions. While its treatment under tax laws still requires clarification, the e₹ represents a major step forward in India’s financial digitization.

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Kuldeep Singh Chundawat: My name is Kuldeep Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.