Cryptocurrency and its major coin, Bitcoin, sparks ongoing debate in India regarding its legality. There’s widespread skepticism about whether cryptocurrency legal in India or not. This article aims to shed light on the legal status of cryptocurrency and solve common misconceptions surrounding its use and acceptance in the country. Here’s the chronology of the emergence of cryptocurrency in India till 2024.
| Period | Event |
| 2008 | A paper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ was published by Satoshi Nakamoto. |
| 2017 | Crypto is gaining momentum in India. The RBI and the Ministry of Finance issued statements comparing cryptos to Ponzi schemes. |
| 2018 | An RBI circular bans financial entities from dealing in virtual currencies, and some exchanges filed a petition in the Supreme Court. |
| 2019 | A committee recommends banning ‘private cryptocurrencies’ in India. |
| 2020 | The Supreme Court revoked RBI’s banking ban on crypto, stating cryptocurrencies are unregulated but not illegal. |
| 2021 | The crypto market revives; Bitcoin sees a 700% increase. |
| April 2022 | A 30% tax on capital gains from crypto transactions is implemented. |
Indians and Crypto: A Look into the Numbers
India has nearly 15-20 million cryptocurrency investors with total crypto holdings 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.
According to a study by Gemini, nearly 54% of traders in India have purchased cryptocurrency for the first time in 2021. The country has come a long way, from witnessing the ban on cryptos in 2018 to the government proposing taxation laws in 2022.
With these numbers, India is emerging as one of the quickest-developing cryptocurrency markets in the world.
However, some people still wonder if cryptocurrency is legal in India. Here is all you need to know about the legal status of crypto in India.
Can You Buy Cryptocurrency Legally in India?
Yes, you can freely buy and sell cryptocurrencies in India through crypto platforms aligned with Indian regulations. For the safety of your investments, look for crypto exchanges registered with the Financial Intelligence Unit.
No law in India prohibits buying and selling cryptocurrencies. Up until March 2020, the RBI restricted this. However, once the Supreme Court revoked the restriction and announced that dealing with cryptocurrencies isn’t illegal, cryptocurrencies have become the preferred medium of investment for people in the country.
According to a report by the Business Standard, there are about 19 million crypto investors in India, and 75% of them are below 35.
Is Bitcoin Legal in India?
Bitcoin is the first and most well-known cryptocurrency, launched in 2009. However, not all cryptocurrencies are Bitcoin; there are thousands of others, like Ethereum, Ripple, Litecoin, Solana, and more.
Just like cryptocurrencies, buying, selling, and HODLing of Bitcoin are also allowed in India, and the same taxation rules are applicable for Bitcoin as they are for the rest of cryptocurrencies.
Where can I Buy Legal Cryptocurrency in India?
Mudrex is one such crypto platform in India that is FIU registered and 100% compliant with the legalities around crypto in India.
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What are the Legal Procedures for Buying Crypto in India?
Investors can buy cryptocurrencies legally by signing up with exchanges and providing all the documents for KYC. Here are three simple steps for doing this.
- Step 1: Download the FIU compliant crypto exchange (Mudrex is secure and 100% compliant to Financial intelligence unit of India)
- Step 2: Submit the essential documents, such as your Aadhaar card and PAN, to complete the mandatory KYC process and link your preferred bank account. This will allow you to transfer funds to your wallet.
- Step 3: Once you have added funds to your wallet, you can start buying cryptocurrencies. Here is how to analyze cryptocurrencies before investing.
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.
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.
How Does Taxation Work in Crypto Buying and Selling?
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 implementing crypto taxation rules in April of this year. Here is how taxes are implemented.
1. Tax on Crypto Gains
Investors earning profits from the sale of cryptocurrencies are liable to pay a 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, you need to pay a 30% tax on the profit of Rs. 25,000. In the above example, the taxation on the profit would amount to Rs. 7500. Moreover, an additional 1% TDS is applicable whenever you deposit or withdraw INR from crypto platforms.
Read in detail about Crypto Tax in India.
2. 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 bring the initial circulation of the tokens into the market. Since this is considered equivalent to discount codes and vouchers, it comes under gifts, which are also taxed at 30% in the recipients’ hands.
3. 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.
learn more about crypto trading taxes here
How is the Government of India Approaching Laws to Legalize Crypto?
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 assets. In this year’s budget, the government has levied a 30% tax on crypto investors along with a 1% TDS. This looks like a progressive move toward a healthy crypto ecosystem.
In fact, the central government is currently drafting a Crypto Bill aimed at regulating digital assets. However, the enactment of this bill into law may require additional time.
Is There Any Risk in Buying Crypto in India Right Now?
While the volatile nature of cryptocurrencies offers many profit opportunities, it also poses risks. Hence, it is crucial to Do Your Own Research before investing in any cryptos.
However, if you are looking to diversify your crypto portfolio and manage risk by investing in various coins, Coin Sets could be one way to do so. They offer the perks of diversification and timely rebalancing, all curated by in-house experts at Mudrex.
Conclusion
In India, while cryptocurrency remains unregulated, it’s not illegal. The government’s forward-thinking on regulation and taxes suggests a growing acceptance, paving the way for a strong crypto ecosystem. Amidst the overwhelming hype, confusion and complexity of crypto, get started with the user-friendly crypto investment platform Mudrex. Click here to visit our website.
FAQs
1. Is cryptocurrency illegal in India?
While cryptocurrency is unregulated in India, it has not been declared illegal. While it remains unregulated, there is no law prohibiting its purchase or sale.
2. Can you buy cryptocurrency in India?
Yes, you can buy cryptocurrency in India. Several platforms and exchanges allow the trading of cryptocurrencies, following KYC norms and other regulations. One such platform is Mudrex, which is FIU-registered and 100% compliant with India’s legal regulations.
3. Is cryptocurrency taxable in India?
Yes, cryptocurrency transactions are taxable in India. The government has introduced specific tax regulations for crypto transactions, including a flat 30% tax on gains from virtual digital assets.
4. What does RBI say about cryptocurrency?
The Reserve Bank of India (RBI) has expressed concerns regarding cryptocurrencies due to potential risks to financial stability. However, it has not banned cryptocurrencies but has urged caution among users and traders about the associated risks.
