India has nearly 15-20 million cryptocurrency investors with total crypto holdings of above $5 billion. The sheer volume of investments shows the vast interest among crypto investors. We are already witnessing the rising numbers of crypto startups achieving unicorn status. Estimates highlight the possible contribution of digital assets at $1.1 trillion by 2032. Today, the popularity of crypto has been rapidly increasing, with giant corporations stepping into the space to adopt it as a mode of payment. However, a part of the population still questions— Is cryptocurrency legal in India?. Here is all you need to know about the legal status of crypto in India.
With these numbers, India is emerging as one of the quickest developing cryptocurrency markets in the world. According to a study by Gemini, nearly 54% of traders in India have purchased cryptocurrency for the first time in 2021. The country has travelled a long way from witnessing the ban on cryptos in 2018 to the government proposing taxation laws in 2022.
Q1. Can You Buy Cryptocurrency Legally in India?
A: Yes, you can freely buy and sell cryptocurrencies in India through crypto platforms like Mudrex. Download now and start investing! No law in India prohibits buying and selling cryptocurrencies.
Up until March 2020, RBI had restricted buying and selling of cryptocurrencies. But once the Supreme Court revoked the same and announced that dealing in cryptocurrencies isn’t illegal, it has become the preferred medium of investment for people in the country. Lakhs of people are already investing in it, and many more are joining the party every day.
Q2. What Are the Legal Procedures to Buy Crypto in India?
A: Investors can buy cryptocurrencies legally by signing up with exchanges and providing all the legal documents for KYC. Here is how to do it in 3 simple steps.
Step 1: Firstly, download the crypto platform.
Step 2: Submit the essential documents such as Aadhaar card and PAN to complete the mandatory KYC process. This way, you can transfer funds in INR to your wallet.
Step 3: Once you have added funds to your wallet, you can start buying cryptocurrencies. Here is how to analyse cryptocurrencies before investing.
Q3. Are There Any Maximum or Minimum Limits on Buying or Selling Crypto?
The minimum amount can vary across exchanges. Although one can buy fractional amounts of any crypto, most exchanges implement a minimum amount. This amount is usually minimal, starting from Rs.100. However, there is no maximum limit as such.
For example, the minimum limit to purchase a Coin Set on Mudrex is Rs.100. At the same time, there is no maximum limit to buying crypto.
Q4. How Does Taxation Work in Crypto Buying and Selling?
A: In this year’s budget, Indian Finance Minister Nirmala Sitharaman classified cryptocurrencies and non-fungible tokens as ‘virtual digital assets (VDA). These are now subject to taxation gains, similar to stocks in the equity market. The Union Budget 2022 has already started to implement crypto taxation rules from April this year. Here is how taxes are implemented.
Tax on crypto gains
Investors earning profits from the sale of cryptocurrencies are liable to pay 30% income tax on their total gains. For instance, if you invest Rs. 1,00,000 in crypto and sell it for a profit of Rs. 25,000 at Rs. 1,25,000. Then you need to pay 30% tax on the profit of Rs 25,000. In the above example, the taxation on the profit would amount to Rs. 7500 bucks. Moreover, there is an additional 1% TDS applicable whenever you deposit or withdraw INR from crypto platforms.
Read in detail about Crypto Tax in India.
Tax on Crypto/NFT airdrops
Most crypto and NFT companies use airdrops to promote their tokens during the initial stages of the launch. It is a marketing strategy where cryptocurrencies are sent to users for free. It also helps in bringing the initial circulation of the tokens into the market. Since this is considered equivalent to the discount codes and vouchers, it comes under gifts which are also taxed at 30% in the recipients’ hands.
Tax on crypto gifts
Crypto assets received as gifts are also taxed at 30% if they exceed the threshold value limit above Rs. 50,000 on the receiver’s end. However, the cryptos received as gifts from relatives or on specific occasions will be exempted from tax.
Q5. How Is the Government of India Approaching Laws to Legalize Crypto?
A: There has been a debate around the legal status of cryptocurrency in India for some time now. Given the government’s attempts to move toward a cashless economy, cryptocurrencies have slowly gained acceptance as an asset. The government has levied a 30% tax on crypto investors along with a 1% TDS in this year’s budget. This looks like a progressive move towards a healthy crypto ecosystem.
There is in fact, a Crypto Bill in the making by the central government that is expected to regulate digital assets.
Q6. Is There Any Risk in Buying Crypto in India Right Now?
A: While the volatile nature of cryptocurrencies puts forth many profit opportunities, it also poses some risks. Hence, Doing Your Own Research before investing in any of the cryptos is crucial. Coin Sets could be one way, you can manage your risks, it helps with the perks of diversification and timely rebalancing.