The crypto wave sweeping across the world is far from settling as more countries seek to explore cryptocurrencies for economic benefits. India is one of the countries fast adopting crypto services by declaring crypto-friendly regulations. Cryptocurrency is a medium of financial transactions built using cryptography. It's virtual money and is considered to be more secure than real money. In this article, we'll answer questions about the legality of crypto in India, including if bitcoin mining is legal. Let's get into it!
Cryptocurrency law in India
2023 is a remarkable year for crypto users, traders, and investors in India. Since March 2020, the Reserve Bank of India has imposed several restrictions on cryptocurrencies. But even with the cryptocurrency rules in India, the Indian crypto market expanded by 641% within a year.
The Indian government isn't planning to ban crypto; instead, they clarified the legal status of crypto during the first quarter of 2022. However, as the finance minister of India, Nirmala Sitharaman gave her speech concerning the 2022 budgeting, the government's plans to tax crypto income became clear.
According to the statement, the Indian government placed a 30% tax on income generated from transferring crypto assets or virtual digital assets (VDAs). In addition, a 1% tax is deducted at the source for each transfer of virtual assets. As of July 2022, both tax regulations are live, but the legalization of crypto assets is yet to be made. Although solid cryptocurrency laws in India have not been made, crypto is not considered illegal for the time being.
How to buy cryptocurrency in India legally?
Crypto-friendly countries usually have flexible laws regarding crypto mining and trading. India is gradually securing a spot in the crypto arena, but is trading cryptocurrency legal in India? Yes, buying and selling crypto coins is 100% legal in India and risk-free when done appropriately. And is cryptocurrency mining legal in India? Crypto mining is quite different from trading cryptocurrencies and usually has different laws. Here is a comprehensive step-by-step guide on how to buy crypto legally in India.
- Get the required documents.
Crypto investors should submit essential documents needed for registration like Aadhaar and PAN cards. Following this, they should complete all processes required in the KYC procedure. - Identify the right crypto exchange.
Crypto exchanges are the channels through which an individual can place an order to buy or sell crypto coins. Some crypto exchanges have a wider range of crypto coins available than others. Exchanges like Binance, WazirX. - Fund your account
Each crypto account interfaces with your bank account and the crypto exchange. You can fund your crypto account directly with your bank account and place an order of your chosen crypto. Other ways to fund your wallet include NEFT, RTGS, credit, or debit. - Securing your purchased crypto
After buying your crypto coins and tokens, you can keep them securely in your crypto wallet on the exchange. Each transaction on each crypto exchange is recorded on the blockchain and can be viewed by the public. However, transactions are kept anonymous as the user's transactions do not feature their names but their wallet IDs.
Now that we've explored buying crypto legally in India, it's equally necessary to know the government's standpoint on crypto mining. So, is cryptocurrency mining legal in India?
Is bitcoin mining legal in India?
As much as we provide answers to the question of is it legal to buy bitcoin in India. Getting answers to the cryptocurrency India legal mining laws is equally important. As one of the fastest growing crypto markets, Indians are open to opportunities to mine, buy and sell crypto and make profitable returns.
While income from transferring crypto assets is taxed in India, capital gains from bitcoin mining aren't taxed. The tax laws do not apply to bitcoin mining, and its possible crypto assets are not considered capital assets. If so, taxes on capital gains will not apply for crypto mining in India.
The reason bitcoin generated through mining might not be taxed is because they are considered capital assets as they are self-created. However, selling such bitcoin can accrue capital gains because the cost of acquiring bitcoin cannot be specifically determined; it's referred to as a self-generating asset.
According to section 55 of the income tax act of India's supreme court, self-created assets taxed for capital gains must have a clearly defined cost of asset acquisition. And bitcoin mining does not fall into that category; hence, no taxes are placed on capital gains from bitcoin mining.
Until the income tax act is reviewed and amended, the current position of the Indian government does not feature any taxation on capital gains from crypto mining. However, the tax authorities may decide to tax capital gains from bitcoin mining as a tax on "income from other sources."
Which cryptocurrency exchange is best in India?
There are several exchanges for cryptocurrency in India legal for use, and they differ in the number of fees charged for joining the platform, making deposits, trading crypto coins, and making withdrawals. As of 2020, the RBI prohibited financial transactions involving crypto. But is cryptocurrency legal in India 2023? Yes, and we've collated a list of the best crypto exchanges with the lowest fees and richest experience for crypto-based transactions. They include:
- Binance
When using trading volume to rank crypto exchanges, Binance is the largest crypto exchange. The company continues to expand to various countries and has provided India access to the Binance app. Indians can purchase crypto coins and tokens with rupees or alternative payment methods like Paytm or UPI.
- WazirX
WazirX is an Indian-focused crypto exchange that provides a platform where individuals can trade, hold, transfer or receive digital assets. Although Binance now owns the company, WazirX remains a top choice among Indians for its fast transaction speeds and great user experience.
- Coinbase
Coinbase is one of the most popular crypto exchanges with a wide international presence. It's easy to use and provides a good user interface with updates on the current market prices of various coins. Coinbase also provides an avenue for users, including Indians, to buy or sell cryptocurrencies.
Other crypto exchanges include the following:
- Zebpay is an Indian exchange that pays 10% interest for lending your crypto coins.
- Paxful is the most popular bitcoin P2P crypto exchange in India.
- Crypto.com is a global crypto exchange that offers up to 14.5% per annum when you subscribe to their earnings programs.
Is trading in cryptocurrency legal in India?
When laws are not obeyed, unpleasant consequences can follow. Hence, individuals must understand what's acceptable by the law and what is not.
Many ask questions like, "can we buy cryptocurrency in India? Or is trading in cryptocurrency legal in India? To get quality information about whether cryptocurrency is legal in India or not, we'll be delving into the statements the Indian government has published about crypto.
In 2020, the Reserve Bank of India prohibited banks, financial companies, and payment platforms from facilitating any crypto transaction. However, in March 2020, the Hon'ble supreme court nullified the ruling, and the new judgment paved the way for financial organizations to allow crypto-based transactions.
Crypto is not illegal in India as of 2023. This statement gives insight into the possibilities in the Indian crypto space.
- First, it means Indians can buy or sell crypto using crypto exchanges like Binance, WazirX, or Coinbase. Investors can also invest in the crypto coin of their choice and hold it long-term. At the same time, traders can engage in crypto trading activities as a source of income.
- Secondly, according to the tax regulations, you'll have to pay tax on capital gains when you trade crypto.
Although buying and selling crypto assets is legal in India, bitcoin and other crypto coins are not considered legal tender. As a result, citizens cannot use crypto to buy or sell commodities or pay for services. Hence, the use of crypto is only limited to trading and investment activities.
How are cryptocurrencies taxed in India?
Are cryptocurrencies legal in India? Some individuals believe that specific crypto coins are legal, like bitcoin, while others are illegal. So, what is the legal cryptocurrency in India? In reality, individuals can trade any cryptocurrencies available on licensed crypto exchanges.
In response to the boom in the crypto market in India, the government has issued tax regulations on crypto. Here are the details!
According to the latest updates in Section 115BBH of the law that describes the taxation of crypto in India:
- All losses incurred from using any virtual currency cannot be offset against income from other digital currencies.
- Infrastructure costs associated with crypto mining operations will not be considered acquisition costs.
India's union budget for 2023 consists of the following:
- Income obtained via the transfer of virtual digital assets such as crypto assets like crypto coins or NFTs will be taxed at a 30% rate.
- There will be no deductions aside from the acquisition costs before stating the income generated from the transfer of digital assets.
- Donating digital assets like crypto assets will result in the recipient being taxed.
How to ensure safe storage of bitcoin?
Like any other financial market, investors and traders in the crypto market are open to attacks from scammers. Therefore, security is a top priority when venturing into the crypto market. After getting familiar with how to buy cryptocurrency in India legally and successfully answering the question is cryptocurrency legal in India, the next step is to identify ways to secure your assets. We've highlighted various security measures you can take to ensure your crypto assets are kept safe.
There are two major ways to store your bitcoin, ether, and other crypto coins. The first is the cold wallet method, and the second is the hot wallet method.
Cold wallets are considered the safer option for storing big crypto assets. They are not connected to the internet and prevent the possibility of being defrauded or your wallet getting hacked online. These cold wallets are also called hardware wallets, and a popular example is the ledger hardware wallet.
The other crypto storage type is the hot wallet. Hot wallets are cloud-based and connected to the internet. They are less secure than cold wallets and are not recommended for storing large amounts of crypto coins.
Crypto mining provides a means for individuals in India to make profitable returns from mining bitcoin. It's a proven and legal way to get profits from crypto in addition to crypto trading. The best mining strategy involves getting started with bitcoin mining using a mining hosting model.
.jpeg)
.jpeg)