Is Cryptocurrency Legal in India? A Comprehensive Guide to India's Crypto Regulations

In a rapidly evolving global landscape, the legal status of cryptocurrencies in India presents a complex picture.

On March 7, 2023, the Ministry of Finance brought cryptocurrency transactions under the ambit of the Prevention of Money-Laundering Act (PMLA) 2002, indicating a move towards more comprehensive oversight. However, India has yet to implement a fully-fledged regulatory framework due to concerns about legitimizing digital assets and creating systemic financial risks.

The Supreme Court of India lifted the Reserve Bank of India's (RBI) 2018 ban on cryptocurrency transactions in March 2020, paving the way for legal crypto trading. As a result, crypto trading is now legal in India, and Bitcoin mining, though existing in a regulatory gray area, is legal.

The Indian government introduced the "Cryptocurrency and Regulation of Official Digital Currency Bill, 2021," aiming to create a framework for the RBI to issue an official digital currency while prohibiting private cryptocurrencies. The bill is still under consideration, and as of 2024, regulations governing the buying and selling of Bitcoin and other cryptocurrencies are still being formulated.

Income from Bitcoin mining, staking, or minting is taxed at a flat rate of 30% plus a 4% cess. Expenses related to mining cannot be deducted from the taxable income. Profits from trading Bitcoin are also taxed at the same rate, and a 1% Tax Deducted at Source (TDS) is applied to transactions exceeding INR 50,000 annually.

If Bitcoin is received as a gift and its value exceeds INR 50,000, it is subject to a 30% tax. Companies are mandated to disclose their cryptocurrency transactions during a financial year, as per a notification issued by the Ministry of Corporate Affairs on March 24, 2021.

The evolving global standards for cryptocurrencies are a topic of ongoing discussion. In an interview, Jayant Sinha, Chair of the Standing Committee on Finance in India's Parliament, mentioned that these standards are still evolving. The Financial Budget 2022 proposed taxing digital assets, including cryptocurrencies and non-fungible tokens (NFTs), at a rate of 30% on the transfer of such assets.

In summary, while cryptocurrencies are legal in India, they are not considered legal tender. Individuals engaging in cryptocurrency transactions are required to report their activities accurately and comply with Indian tax regulations, including maintaining detailed records of all transactions and filing the appropriate Income Tax Return (ITR) forms. As the regulatory landscape continues to evolve, it is essential for individuals and businesses to stay informed about the latest developments in this dynamic field.

Is Cryptocurrency Legal in India? A Comprehensive Guide to India's Crypto Regulations