Bitcoin nears $90,000: How can I trade cryptocurrencies in India?

Bitcoin has once again captured headlines with a record-breaking rally, touching nearly $90,000 following Donald Trump's win in US presidential elections.

This surge represents an over 25% gain since the announcement of election results and is part of a broader positive trend across the cryptocurrency market.

The optimism stems from Trump's campaign promises to support digital assets and transform the US into a "crypto capital," fostering an environment that could encourage investment and clearer regulatory frameworks.

This development has sparked renewed interest in crypto trading globally, including in India, where the crypto market has been active despite strict regulations and tax implications.

Meanwhile in India, the landscape for cryptocurrency trading has evolved significantly over the past few years.

The Supreme Court ruled in favor of the legality of cryptocurrencies, leading to increased participation from both individual and institutional investors.

However, the market operates under strict tax laws, including a 30 per cent tax on gains from Virtual Digital Assets (VDAs) and a 1 per cent Tax Deducted at Source (TDS) on each transaction above a certain threshold.

Despite the regulatory challenges, interest remains high as traders seek to capitalize on market trends and potential gains, making it essential for crypto enthusiasts to understand the trading process and associated tax rules.

Here is an FAQs on crypto trading in IndiaQ.

Is cryptocurrency trading legal in India?Yes, cryptocurrency trading is legal in India.

The Supreme Court lifted the Reserve Bank of India's banking ban on crypto in 2020, allowing trading to resume under regulated circumstances.

While there is no comprehensive crypto regulation, the government recognizes cryptocurrencies as Virtual Digital Assets (VDAs) subject to specific taxation policies.

Q.

What taxes apply to cryptocurrency gains in India?Profits from crypto trading incur a flat 30% tax on gains.

Additionally, a 1% TDS is deducted on each transaction above ₹50,000 (or ₹10,000 for specified categories).

This TDS is applicable whether or not a profit is made on the transaction and can be filed for returns during Income Tax Return (ITR) filings.

Q.

How is the 1% TDS on crypto transactions applied?The 1% TDS is deducted from the total sale amount, not just the profit, and applies to all transactions exceeding the specified limits.

For example, if you sell crypto worth ₹1 lakh, ₹1,000 will be deducted as TDS.

Q.

Can I offset losses from one cryptocurrency against gains from another?No, the current tax framework in India does not permit the offsetting of losses from one VDA against gains from another.

For instance, if you make a profit of ₹1 lakh from Bitcoin but incur a loss of ₹50,000 from Ethereum, the tax will still be calculated solely on the profit without accounting for the loss.

Q.

What steps should I follow to start trading cryptocurrencies in India?Choose a platform: Select a registered exchange.

KYC compliance: Complete Know Your Customer (KYC) verification.

Deposit funds: Transfer money using supported methods like bank transfers.

Trade and store securely: Execute your trades and keep assets in secure wallets.

Q.

What risks should I be aware of in crypto trading?Crypto trading is highly volatile.

Prices can change drastically within short periods, and digital assets are susceptible to hacking and scams.

Moreover, changes in regulations can impact market dynamics, so staying informed and cautious is crucial.

Q.

How do I withdraw profits from crypto trading?To withdraw, sell your assets on an exchange, ensuring the TDS deduction is accounted for, and transfer the proceeds to your bank account.

Compliance with tax regulations during withdrawals is essential.

Q.

What future trends could affect crypto trading in India?India's crypto space is experiencing shifts that include potential new regulations aimed at innovation and investor protection.

The introduction of crypto ETFs, decentralized finance (DeFi) platforms, and crypto-backed financial products could shape the market in the coming years.

Q.

What environmental concerns are associated with crypto trading?Bitcoin mining and other crypto activities have significant energy consumption, which has been likened to that of running 190 natural gas power plants.

With growing scrutiny, there is an industry push toward more sustainable practices using clean energy sources.

Understanding the regulatory environment and tax obligations is essential for anyone trading cryptocurrencies in India to navigate the market responsibly and maximize potential returns.

(With inputs from agencies).