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Is Trading In Cryptocurrency Legal In India

Don’t know if cryptocurrency is legal or illegal in India? Read this blog to get the answer. Find out more about which cryptocurrency is legal in which countries. Update: The Government of India is set to introduce “The Cryptocurrency and Regulation of Official Digital Currency Bill”, which will effectively ban most cryptocurrencies with a few exceptions. The GOI has also introduced a framework in the bill for the introduction of a national digital currency. We will keep this blog updated with the latest info.
November 24, 2021

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Cryptocurrency has become all the rage across the globe. There are top global brands who’ve either bought a reserve of crypto like Tesla or have started accepting crypto as payment like Dallas Mavericks. 

This has boosted the legitimacy of crypto. Add the skyrocketing prices to the mix and most global citizens want to own a piece of Bitcoin, Ethereum, Tether, Dogecoin, and others, including Indian investors.  

In fact, India is home to the largest number of crypto owners in the world at 10 crores. A large part of the relative success in India is down to top exchanges like WazirX, CoinDCX, and others. 

That said, potential crypto investors in India have to ask questions like “is cryptocurrency legal in India” or “is cryptocurrency trading legal in India” because the rules and laws are constantly changing. Lucky for you, we’ll answer all these questions in this blog. 

Is Cryptocurrency Trading Legal Or Illegal In India?

First things first, cryptocurrency is not illegal in India as of 24th November 2021. This statement has two implications:

  • Indian investors can trade new cryptocurrencies in India on an exchange like Binance or WazirX
  • You’ll have to pay tax on the capital gains earned by trading cryptocurrency

There was a blanket ban on crypto transactions courtesy of the RBI back in 2018 that was overturned by the Supreme Court in 2020. The RBI has gone on to clarify since then that crypto is not illegal in India. 

But, there’s a catch. Cryptocurrency isn’t legal tender in India. This simply means that you can’t use it to buy or sell goods and services. There’s also another issue - there’s no regulatory framework. 

Regulatory frameworks play an important role in financial securities. They help protect investors from dubious claims, assets, and advisors that can potentially harm investors’ financial well-being.

For example, if a certain publicly-traded company refuses to follow the law, you can highlight it to SEBI and they’ll ensure compliance or punishment. The same can’t be done in the crypto world. 

Thus, cryptocurrency trading is legal in India with the caveat that investors will have to look out for their well-being until a robust regulatory framework is introduced by the Government of India.

Is Cryptocurrency Taxable In India?

If the RBI and SEBI allow you to trade an asset, it generally means that you’ll also have to pay tax on the capital gains. Similarly, cryptocurrency trading is legal in India, which means it carries a tax.

You’ll be taxed according to your tax slab for short term capital gains (with surcharge and cess) while long term capital gains are taxed at 20% with indexation benefits.

Crypto Tax Type

Tax %

Indexation Benefit

Short Term Capital Gains

As per I-T Slab

No

Long Term Capital Gains

20%

Yes

List Of Countries Where Cryptocurrency Is Legal

The legality of crypto is much debated across the world. But the term itself is quite loose. In certain countries, trading crypto is legal. This constitutes countries like India, the USA, Canada, Mexico, and others.

Top 10 Countries Where Crypto Trade Is Legal

El Salvador 🇸🇻

United States 🇺🇸

Canada 🇨🇦

India 🇮🇳

Japan 🇯🇵

Germany 🇩🇪

France 🇫🇷

Philippines 🇵🇭

Singapore 🇸🇬

Russia 🇷🇺

But there’s only one country where trading crypto is permissible and used as legal tender. That’s the Central American country of El Salvador 🇸🇻, which became the first country to legalise Bitcoin completely.  

Conclusion

Cryptocurrency trading is legal in India as of writing this blog. There are no specific regulations around crypto trading but there is chatter about the Government of India working towards establishing guidelines. 

Just because there’s an absence of crypto regulations in India doesn’t mean you can avoid taxes. Currently, the short term capital gains are taxed as per the investor’s I-T slab. 

Long term capital gains are taxed at 20% with indexation benefit. The world of crypto is still nascent and thus, it’s always advisable to exercise caution when investing your hard-earned money into crypto. 

Is there such a thing as stable cryptocurrency? Tap here to find out!

Note: Facts & figures are true as of 23-11-2021. None of the information shared here is to be construed as investment advice. Exercise caution when investing in unregulated assets like cryptocurrency. 

Shriram Shekhar
Shriram is a Content Marketer at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. Shriram’s love for philosophy, product development, and empowering people through quality content is what got him to Cube Wealth.

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