Bitcoin is certainly the most popular cryptocurrency in the world right now, and India stands to benefit considerably from this revolutionary technology. However, citizens are still confused about whether cryptocurrency is legal in India. We have traveled a long way since the banking ban on cryptos in 2018. While a cryptocurrency bill is still in the pipeline, the Government initiated a series of discussions with the stakeholders in the crypto industry in 2021. The Union budget speech could be called a landmark in the history of cryptocurrency in India as, for the first time, the Government proposed taxing cryptos, legitimizing them (if not legalizing them). However, we still need further clarity on the Government’s stance on cryptos.
However, to answer the pressing questions, including “Is Bitcoin Legal in India in 2022?” and to clear any confusion regarding the cryptocurrency’s taxation status in India, we have answered the nine most frequently asked questions surrounding Bitcoin’s legal status in India.
Q1- Is it legal to buy Bitcoin in India?
Yes, Bitcoin is 100% legal in India. No clear laws and regulations exist to monitor Bitcoin as of April 2022, but the Government has imposed a 30% flat rate of crypto tax on gains from the transfer of cryptocurrencies in India. Despite the tax implication, the legality aspect of Bitcoin and cryptos hasn’t yet been discussed. However, it doesn’t mean that you can’t trade in cryptocurrencies legally. Exchanges like WazirX operate on self-imposed regulations, where one is held to the same standards as a traditional exchange.
Q2- How do I ensure that my Bitcoin is stored safely?
To store your bitcoins, you have two options: cold wallets or hot wallets. Hot wallets are online wallets connected to the internet and are convenient for transactions but are a little less secure when compared to cold wallets. Hot wallets are usually not recommended for storing large amounts of bitcoins.
Alternatively, cold wallets are a safer option for safely storing your bitcoins, as they are offline wallets or hardware wallets. You can read more about these wallets to secure your bitcoin storage and prevent it from scams.
Q3- What are the legal procedures to buy bitcoin in India?
- The first step is to register yourself on a trusted crypto exchange platform. It is the most crucial step as you have to choose the most reliable and trustworthy crypto exchange platform for safe and secure trading. One such reliable and most trusted crypto exchange is WazirX.
- After registering, you have to verify your KYC by providing legal documents such as a pan card, an Aadhaar card, etc. Again, it is recommended that you choose an exchange with proper KYC and AML procedures to ensure 100% legal compliance.
- Add your bank details and UPI details to the crypto exchange and wait once all the verification completes.
- Lastly, you can add money to your trading account via your bank and then use it to buy bitcoin on the crypto exchange.
Q4- What are the Government’s views on buying or selling Bitcoin?
The Government has concerns over using Bitcoin for making payments for illicit activities such as money laundering, tax evasion, terrorism financing, etc. The Government intends to prevent the illegal usage of cryptocurrencies. However, as we’ve discussed in a recent post, blockchains can be excellent forensic tools to catch malicious actors.
RBI is planning to issue a digital rupee in the FY 2022-2023. Besides this, the Government has proposed some tax provisions regarding the sale/purchase/transfer of cryptocurrencies in the Union Budget of 2022.
New tax rates have been imposed on the transfer of digital assets, which includes Bitcoin and other cryptocurrencies. The budget also explains what constitutes digital assets. A digital asset will include ‘any information or code or number or token (not being Indian currency or any foreign currency), generated through cryptographic means.’ The digital asset may be exchanged with or without consideration.
Q5- What are the taxation policies for Bitcoin in India?
Cryptocurrency taxation in India was one of the most confusing aspects when buying bitcoins. Earlier, neither the Income Tax Act nor the GST act defined cryptocurrencies. However, in the 2022 Union Budget, FM Nirmala Sitharaman proposed a tax regime for digital assets, including cryptocurrencies.
- Anyone holding Bitcoin or cryptocurrencies in India would be required to report their gains or losses from the digital assets as a part of their income.
- A flat 30% tax will be charged on the income from the transfer of digital assets.
- 1% TDS will be deducted on the payment by the buyer if the amount crosses the threshold limit.
- Cryptocurrency is subject to be taxed at the recipient’s end if received as a gift or transferred.
- The loss from virtual asset investment cannot be offset against any other income.
The provisions are applicable from April 1, 2022. However, more clarity is expected soon.
Q6- What is the minimum amount needed to buy Bitcoins in India?
It depends on the cryptocurrency exchange. While the price of a Bitcoin may be in tens of lakhs, you have the option to buy a fraction of bitcoin for as low as INR 100. For example, WazirX allows you to buy Bitcoin for as low as INR 100.
Q7- Is Bitcoin mining legal in India?
The legal status of Bitcoin mining is not clear in India and still faces uncertainty. Mining Bitcoin requires a lot of energy, and it consumes about 60 terawatt-hours annually. But the government practically banned the import of ASIC machines in India in 2017.
A ban on ASIC machines leaves the miners with GPU mining, which is an energy-intensive process and is not a desirable option considering the high electricity costs and low efficiency. In fact, Bitcoin miners have abandoned GPU mining altogether, as it is deemed to be unprofitable.
Q8- What legal steps should be taken to safeguard against Bitcoin fraud and scams?
Here are a few steps to consider before deciding to invest in Bitcoin.
- There are various fake crypto exchange platforms out there, and there is a need to do market research before buying bitcoins from an exchange platform. Stick to reliable and trusted crypto exchange platforms such as WazirX.
- Make sure to safely store your bitcoin in an offline wallet for better security.
- Make sure you set up two-factor authentication for your online crypto-wallets.
- Never share your private key or login credentials with anyone.
Q9-Will Bitcoin be accepted as a legal mode of payment?
Globally, many use crypto assets as a mode of payment due to easy global transfer and lower transaction costs than bank transfers. However, the Government of India does not grant cryptocurrencies or Bitcoin the status of a legal tender. And we might not see the Government doing it anytime soon. In 2022, the Government has taken the initial steps of regulating cryptocurrencies via the proposed tax regime. Despite the positive steps by the Government, L Badri Narayanan, a legal expert, states that ‘the recognition of digital assets under income tax is not akin to granting legal status.’ Notwithstanding the above fact, thousands of global e-commerce merchants accept Bitcoin and cryptocurrencies as payment.
We hope this guide answered a few of your questions regarding the legal status of cryptocurrency and whether it is legal to buy Bitcoin in India in 2022 or not. Also, if you’re looking for more information regarding the wide world of crypto, head over to our blog page – where we publish informative articles regularly for your benefit.
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In India, Bitcoin is not illegal. Because of cryptocurrency's rapid evolution, policymakers and regulators seemed to have recognized the chance to accept the new technology early. From the infamous 'RBI ban' in 2018 to reports of an impending bill banning cryptos in 2021 that has yet to develop, India has seen its fair share of ups and downs when it comes to Bitcoin regulation. Last year, the Supreme Court Of India approved the use of Bitcoin throughout the country. According to the Supreme Court, the existence of Bitcoin or any other cryptocurrency is unregulated but not unlawful.
There are 18,730,931.25 Bitcoins in circulation as of June 2021. The total number of Bitcoins that would ever be there is just 21 million. On average, 144 blocks are mined every day, with 6.25 Bitcoins per block. The average number of new Bitcoins mined every day is 900, calculated by multiplying 144 by 6.25.