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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?
If you are wondering, is it legal to buy Bitcoin in India? Here are the legal procedures to buy bitcoin in India are as follows:
- 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.
Conclusion
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.
Further Reading:
What is the difference between a token and a Bitcoin?
Are Tether and Bitcoin related? How Tether affects Bitcoin?
6 Things to Consider Before Investing in Bitcoin
What are the Differences Between Bitcoin and Ripple?
6 Bitcoin Myths That You Should Stop Believing
Bitcoin Wallets: The Definitive Guide
What is Litecoin (LTC)? Hows is it Different from Bitcoin?
What are the Differences Between Peer-to-Peer and Regular Bitcoin Exchanges?
Why are Bitcoins More Popular?
6 Tips to Keep Your Bitcoin Wallet Safe
5 Ways to Keep Bitcoin Transactions Private
What Will Happen when all Bitcoins are Mined?
Bitcoins in India: Challenges and Opportunities Ahead
Does Bitcoin have a volatile nature? Why?
Can Bitcoin Replace Credit Cards?
Why Start-ups Should Consider Using Bitcoins?
What is Bitcoin halving? Why is it important for cryptocurrency investors?
Can you buy shares in Bitcoin?
What is the difference between a token and a Bitcoin?
Are Tether and Bitcoin related? How Tether affects Bitcoin?
Opportunities And Challenges In Indian Crypto Market
Frequently Asked Questions
What Is The Meaning Of Bitcoin?
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.
What Type Of Currency Is Bitcoin?
Bitcoin is a type of digital currency or cryptocurrency. In January 2009, Bitcoin was established. It's based on Satoshi Nakamoto's ideas, which he laid out in a whitepaper. The name of the individual or people who invented the technology remains unknown.
How Bitcoin Mining Works?
Bitcoin mining is a crucial element of the blockchain ledger's upkeep and development and the act of bringing new Bitcoins into circulation. It's done with the help of cutting-edge computers that solve exceedingly challenging computational arithmetic problems. Auditor miners are rewarded for their work. They're in charge of ensuring that Bitcoin transactions go through smoothly and legitimately. This standard was established by Satoshi Nakamoto, the founder of Bitcoin, to keep Bitcoin users ethical. By confirming transactions, miners assist in avoiding the "double-spending issue."
Can Bitcoin Be Converted To Real Money?
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.
Who Created Bitcoin?
Bitcoin is the first application of the concept of "cryptocurrency," first articulated in 1998 on the cypherpunks mailing list by Wei Dai, who proposed a new form of money that relies on cryptography rather than a central authority to manage its creation and transactions. Satoshi Nakamoto published the initial Bitcoin specification and proof of concept on the cryptography mailing list in 2009. Satoshi exited the project in late 2010, with little information about himself available. Since then, the community has evolved, with numerous people working on Bitcoin. Satoshi's anonymity has sparked unfounded fears, many of which may be traced back to a misunderstanding of Bitcoin's open-source nature.
How Does Bitcoin Work?
The blockchain, a distributed digital ledger, is what Bitcoin is based on. As the name suggests, blockchain is a linked database made up of blocks that store information about each transaction, such as the date and time, total amount, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological order to form a digital blockchain. Entries are linked in chronological order to form a digital blockchain. Blockchain is decentralized, which means any central authority does not control it.
How Bitcoin Works?
Bitcoin is based on the blockchain, a distributed digital ledger. As the name implies, blockchain is a connected database made up of blocks that hold information about each transaction, such as the date and time, total value, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological sequence, forming a digital chain of blocks. Blockchain is decentralized, meaning a centralized institution does not own it
What Is Bitcoin Used For?
Bitcoin was created as a means of sending money over the internet. The digital currency was designed to be a non-centralized alternative payment system that could be used in the same way as traditional currencies. Bitcoin is being used by an increasing number of businesses and individuals. This includes establishments such as restaurants, apartments, and law firms.
How Does Bitcoin Technology Work?
The blockchain is the foundation of Bitcoin. It is a decentralized, distributed ledger that tracks the provenance of digital assets. The data on a blockchain can't be changed by design, making it a real disruptor in industries like payments, cybersecurity, and healthcare.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
