Table of Contents
Bitcoin is definitely the most popular cryptocurrency in the world since its inception, 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 2023?” 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 November 2023, 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 for buying 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. However, 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.
Bitcoin is a digital currency that was initially released in January 2009. It is based on ideas offered by Satoshi Nakamoto, a mysterious and pseudonymous figure, in a whitepaper. The name of the person or individuals who invented technology has not been revealed. Bitcoin promises lower transaction fees than other online payment systems, and unlike government-issued currencies, it is decentralized.
In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.
The source code of Bitcoin stipulates that it must have a restricted and finite quantity. As a result, only 21 million Bitcoins will ever be generated. These Bitcoins are added to the Bitcoin supply at a predetermined rate of one block every ten minutes on average. The supply of Bitcoins will be depleted once miners have unlocked this number of Bitcoins. It's possible, however, that the protocol for Bitcoin will be altered to allow for a higher supply.
Bitcoin mining isn't free, but it can be tried on a budget. Bitcoin mining is an essential part of the blockchain ledger's upkeep and development and the act of issuing new Bitcoins. It is accomplished by the use of cutting-edge computers that tackle complicated computational arithmetic problems. The effort of auditor miners is rewarded. They're in charge of ensuring that Bitcoin transactions go off without a fuss and that they're legal.
Crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, and Peer Peer Transactions are all options for converting Bitcoin to cash. This can be accomplished by using Bitcoin exchanges such as WazirX. A Bitcoin ATM is a real place where you may purchase and sell Bitcoins with cash, unlike standard ATMs that allow you to withdraw money from your bank account. Many websites provide the option of purchasing Bitcoin in return for a prepaid debit card that works similarly to a standard debit card. Through a peer-to-peer marketplace, you may sell Bitcoin for cash faster and more privately.
Bitcoin is a type of cryptocurrency that was first introduced in January 2009. It is invented based on the key concepts and notions presented in a whitepaper by Satoshi Nakamoto, a mysterious and pseudonymous figure. The name of the individual or people who invented technology is yet unknown. Bitcoin promises reduced transaction fees than existing online payment methods, and a decentralized authority controls it, unlike government-issued currencies.
Some investors are afraid of the risks or devastation, but others are very eager to pursue the possibility of profit from a Bitcoin investment. A Bitcoin investment is similar to stock investing, except it can be more volatile.
Bitcoin may be invested in two ways: through mining or exchanges. Bitcoin mining is carried out by high-powered computers that solve challenging computational arithmetic problems that are too difficult to complete by hand and complex enough to tax even the most powerful computers. WazirX, a Bitcoin exchange, is another alternative.
Two Yale University economists (Yukun Liu and Aleh Tsyvinski) produced research titled "Risks and Returns of Cryptocurrency" in 2018. They looked at the possibility of Bitcoin crashing to zero in a single day. The authors discovered that the chances of an undefined tragedy crashing Bitcoin to zero ranged from 0 percent to 1.3 percent and was around 0.4 percent at the time of publishing, using Bitcoin's history returns to determine its risk-neutral disaster probability. Others claim that because Bitcoin has no intrinsic value, it will inevitably crash to zero. On the other hand, Bitcoin advocates argue that the currency is backed by customer confidence and mathematics.