Bitcoin is now all over the headlines having crossed the $100,000 mark over the period of time following crypto supporter Donald Trump's win in US presidential elections. The rally came from Trump promising to support such types of digital assets and turn the US into a "crypto capital," with a favourable environment and clear regulations. The rally has also sparked discussions on how to trade cryptocurrencies in India and whether they are legal or not.
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Is Bitcoin legal in India?
Bitcoin as well as all other cryptocurrencies are legal in India with the Supreme Court ruling in favour of cryptocurrencies, lifting a ban imposed by the Reserve Bank of India (RBI) prior.
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However, there are strict taxation laws, which includes a 30% tax on gains from Virtual Digital Assets (VDAs) and a 1% Tax Deducted at Source (TDS) on every transaction above ₹50,000 (or ₹10,000 for specified categories).
The TDS is applicable to the total sale amount whether profits are made or not and has to be filed in the Income Tax Return (ITR) to get refunds.
{{/usCountry}}The TDS is applicable to the total sale amount whether profits are made or not and has to be filed in the Income Tax Return (ITR) to get refunds.
{{/usCountry}}It is also not possible to offset losses from one type of VDA to another. For example, losses from trading in Ethereum can't be used to offset gains from trading in Bitcoin.
How to invest in Bitcoin in India?
It is possible to invest in Bitcoin by choosing a certified crypto exchange, registering yourself with your Know Your Customer (KYC) details, depositing funds using supported methods like bank transfers, and then making trades and keeping the assets in secure crypto wallets.
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For selling cryptocurrencies, it is important to ensure the TDS deduction is accounted for, and the proceeds are transferred to your bank account, fully complying with tax regulations.
However, it is important to keep in mind that crypto trading is highly risky owing to the volatile nature of prices. On top of that, they are also susceptible to hacks and scams. More importantly, they are also very prone to regulatory changes.
Regulatory risks of cryptocurrencies in India
For example, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 aims to regulate the industry by banning private cryptocurrencies while at the same time, setting up the stage for the RBI's central bank digital currency (CBDC).
However, this has been delayed. The proposed restrictions on private digital currencies are to mitigate risks like money laundering and fraud.