Earning from cryptocurrency is legal in India. It is legal to invest in crypto in India through exchanges and earn from it, provided you comply with regulatory requirements such as registration. At the same time, cryptocurrencies are not regulated in India, and the nation’s government has stated that they are not legal tender. In other words, you can legally earn from crypto, but you do so in a market without a dedicated rulebook — and your profits are taxed.
How Indian law treats cryptocurrency
From being called speculative products to ‘virtual digital assets’ (VDAs), cryptocurrencies have come a long way in India, and the road has been bumpy. In 2019, a draft Bill was issued under which holding, mining, selling, issuing, transferring or using cryptocurrency was made punishable with a fine or imprisonment of up to 10 years, or both. That position did not stand: in March 2020, the Supreme Court removed the ban on cryptocurrencies.
India at present has no regulation for cryptocurrencies — a set of decentralised digital currencies, such as Bitcoin, Dogecoin and Ethereum, that are not regulated by any banking regulator. Crypto is also not legally recognised tender, meaning there is no expectation for anyone to accept it instead of actual money. Not being recognised, however, is different from being banned: holding, trading and earning from crypto is permitted.
How crypto earnings are taxed
From April 1, India introduced a tax on all VDAs. The law states that any income earned from the transfer of digital assets is taxed at 30 per cent, with no deductions or exemptions. According to the Budget document, the 30% tax on cryptocurrency and other VDAs applies from Assessment Year 2023-24, covering income from crypto transactions in FY 2022-23.
Mining has its own tax reality. Crypto mining in India is legal, though not widely practiced, and a 30% tax is levied on any income from mining activities.
The tax changed how the industry talked about legality: when the new taxes were imposed, Binance declared on Twitter that crypto had become legal in India and that the government had cleared confusion with a crypto asset tax law. Advocates for legalising virtual digital assets, meanwhile, point out that India taxes cryptocurrency at 30% Capital Gain Tax plus 1% TDS while offering no legal recognition, no investor protection and no dedicated AML framework for the asset class.
Where the Reserve Bank of India stands
The central bank has been openly sceptical. Days after the Union Budget proposed taxing cryptocurrencies — a move that gave rise to apprehensions of legitimising them — a Reserve Bank of India (RBI) official asked for a complete ban on such virtual currencies, citing a threat to macroeconomic stability.
Buying and selling on Indian exchanges
You can trade cryptocurrencies legally in India today. Exchanges like WazirX operate on self-imposed regulations, holding themselves to the same standards as a traditional exchange. You also do not need a large sum to start: while the price shifts almost every second, you can buy a fraction of a Bitcoin at prices as low as INR 100 on WazirX.
Cashing out is straightforward in principle. To cash out your funds, you first need to sell your cryptocurrency for cash; then you can either transfer the funds to your bank or buy more crypto.
Is investing in cryptocurrency safe in India?
Even investing in the world’s most valuable asset, gold, has its own set of risks — and crypto is no different. The risks worth understanding before you invest include price volatility and manipulation, lack of regulations, market adoption, security, custody and consumer rights, and exiting the market.
Weigh the potential reward against what you are putting at stake. If you are taking a risk on Rs1,00,000 to earn Rs500, that is not a recommended investment choice. Investing in crypto assets is risky but also potentially extremely profitable; a safer but potentially less lucrative alternative is buying the stocks of companies with exposure to cryptocurrency.
The bottom line
Earning from crypto is legal in India. There is no ban on holding, trading or profiting from virtual digital assets, but there is also no dedicated regulation protecting you, and income from transferring VDAs is taxed at 30 per cent with no deductions or exemptions. Understand those risks properly, and only if you are comfortable with them, take the plunge.
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