By Lal Singh The legal status of cryptocurrencies in India still complicated. Cryptocurrency is neither completely prohibited nor allowed.
What You Can and Can’t Do
Just like Bitcoin and Ethereum you can also buy, trade and invest in cryptocurrencies in India but they are not yet treated as a legal money.
You can trade them only on exchanges but you can’t use them like Indian rupees to pay for buying any products or services.
Rules and Taxes:
While the government has not established a fully comprehensive law expressly for crypto the major factors have formed the existing framework.
- Indian government made the tax laws very clear: in the beginning of the 2022-23 financial year, profits from trading VDAs will be taxed at 30% under Section 115BBH of the Income Tax Act, 1961.
- Also, a 1% TDS applies to the transfer of these assets over a certain amount which shows that the government is trying to have a control over the flows.
- In March 2023 the government classified VASPs under the PMLA Act, 2002 reporting framework – meaning exchanges and other service providers need to follow AML and KYC requirements.
Legal Ambiguities and it’s Risks:
Even with these rules, there is still a lot of confusion:
- Cryptocurrencies are not considered as a real money. RBI always keep telling in their press release that Cryptocurrencies are never considered as a legal tender and one can’t buy or sell services in exchange of the Cryptocurrency.
- The absence of a dedicated law means how some edge cases will be handled is a big question.
- Because regulation is very strict for service providers individuals trading through unauthorized trading platforms, they might face additional risk – like regulatory action or lack of dispute-resolution technology.
- A recent verdict by the Madras High Court described crypto assets as “property capable of being held in trust” – a significant recognition of ownership rights – indicating courts are increasingly treating crypto seriously in property/contract law terms.
What It Means for Investors:
For someone in India considering going for Cryptocurrency:
- You are permitted to buy, hold, sell and exchange crypto. But be careful because the virtual currency market is still unstable and the policies aren’t clear yet.
- You should not simply assume that you can use crypto like a physical currency for buying any kind of goods or services from the market, just like paying for things. It isn’t a physical money that can be used.
- You must assume that tax obligations apply: capital gains, income tax on crypto profits, and potential TDS. Keep careful records.
- Use platforms that follow Indian laws (KYC/AML). Using unregistered or offshore exchanges makes you more likely to lose money.
- Since the rules are always changing, so try to make your own flexible plan. New rules could affect how you use the crypto, disclose or tax things.
Outlook:
India is constantly changing its digital-asset policy. The Indian government is finding a right way to balance between new technologies and the risk they provide, which includes digital fraud, money laundering and problems with the financial system.
As per the Madras High Court verdict the protections for cryptocurrency investors might get better but so may the obligations on regulators.
Conclusion:
Is it fine to use cryptocurrency in India? Yes but in the sense that you can only purchase, sell and stock it digitally but you have no right to trade or exchange it in terms of buying any products or services from market.
Cryptocurrency is not yet considered as a legal tender and is governed by a lot of rules and taxes. If you want to participate or think of it as a regulated asset class that is always changing, not as an unregulated free-for-all. remain compliant, remain up to date, and be careful.