Is Bitcoin Legal in India? 5 Commonly Asked Questions

Bitcoin has slowly but steadily influenced everyone in some way. What's the deal with this decentralized digital currency whose creator's whereabouts are unknown? As of July 2021, 650,000 Bitcoin transactions are processed daily. What distinguishes Bitcoin in this thriving cryptocurrency market, where new currencies are introduced daily? 

Bitcoin's primary advantages are its network effect and proven security. The cryptocurrency is becoming more accessible, with more exchanges, merchants, software, and hardware supporting it. It has arguably the largest developer ecosystem of any coin, with more software and implementations than any other. And now you understand why it is so powerful. 

Is everything, however, so welcoming to Bitcoin?

Many prominent and developed countries, including India, allow Bitcoin trading, while a few countries have banned it, as well as other cryptocurrencies.

Even though it is the face of frankly revolutionary technology and an advent of an exciting future, there’s much to understand for regulators and nations, post which we should hopefully see an exciting embrace of cryptocurrencies. Already, Bitcoin’s immense popularity is forcing everyone across institutions to notice.

What about India? Is there a Bitcoin tidal wave?

Glad you asked. It's no surprise that it's gaining traction. According to Chainalysis, cryptocurrency investments increased from $923 million in April 2020 to nearly $6.6 billion in May 2021. India still lags behind other markets, ranking 18th out of the top 25 countries, but the fact that it happened despite a lack of regulatory clarity is admirable. There’s consensus in the crypto community that even the government prefers that cryptocurrency be regulated rather than banned. India now has more than 15 million traders, compared to 23 million in the United States. Is this to say that bitcoin is now legal in India? We're sure you'll have more questions. Don't be concerned. We will do our best to cover the majority of it for you.

1. Is it legal in India to buy bitcoin?

As previously stated, Bitcoin is legal in India, which means you can buy and sell it and hold it as an investment, but there is no governing body to look after or protect it. "There is a lot of confusion in India right now. The thing is that there are no regulations in the country yet. When people hear that, they get scared. The fact is that a lot of things on the internet are unregulated. These included services like Ola and Uber, even e-commerce is un-regulated,".

2. Is bitcoin taxable in India?

Cryptocurrencies are not mentioned in the Indian Income Tax Act, and no rules have been established. Since the Reserve Bank of India (RBI) has not yet granted bitcoin or any other cryptocurrency’s legal tender status in India, no specific rules govern how these cryptocurrencies should be taxed. This doesn’t mean you can get away with not paying taxes on your profits. Profits from bitcoin sales can be taxed as business income if traded frequently or as capital gains if held for investment purposes.

3. How do I buy Bitcoin in India?

Buying cryptocurrency can be a complicated process, but there are crypto exchanges that make it relatively simple. In most cases, the process is fairly similar. To open a crypto trading account, first, sign up on a crypto exchange, Then, fill out your personal information > Verify your email> and secure your account.

Finally, transfer money (INR) to your trading account, which you can use to purchase bitcoin or any other cryptocurrency of your choice.

4. Can I exchange bitcoin for cash in India?

The liquidity of Bitcoin is one of the reasons why people are buying it. People want to convert their Bitcoin to cash when they’d like to exit their investments for various reasons - from cash needs to simply being bearish on the market. So yes, you can ultimately convert your bitcoins into cash by selling them. And you can do it easily in India with the help of a reputable cryptocurrency exchange.

You’re likely to require a KYC-verified account to exit your Bitcoin to cash, though. So do remember to complete such requirements.

5. Which bitcoin wallet is the best in India?

There are several types of Bitcoin wallets that cater to different needs and differ in security, convenience, accessibility, and other factors. Mobile wallets, desktop wallets, exchange wallets, paper wallets, and hardware wallets are a few examples. The bitcoin wallet functions similarly to an online bank account in that it stores all of your bitcoins. Bitcoins and other cryptocurrencies can be received and safely stored in your wallet. 

Indian investors have been progressively exhibiting interest in supporting the cryptocurrency markets, seeing the potential of the rising market. The market in India, which has around 15 million Indians, has already surpassed the crypto market in the United Kingdom, which has 2.3 million investors. 

This clearly shows that the lack of regulatory clarity has not prevented Indians from operating exchanges. Nothing can be predicted about bitcoin's future in India at this time, but it is undeniable that it is on its way to becoming a mainstream asset class.