Crypto Basics & Regulatory View

Cryptocurrency is not just "Magic Internet Money." It is a new asset class. But in India, it walks a tightrope between "Innovation" and "Ban."

1. Is Crypto Legal in India?

Yes, but...

• It is Legal to buy, sell, and hold Crypto.
• It is Not Legal Tender. You cannot buy a chai or a car using Bitcoin.
• It is Unregulated. If an exchange runs away with your money (like FTX), SEBI/RBI won't save you.

2. How is Crypto Taxed in India? (The Pain Point)

The Government wants to discourage crypto trading. Hence, the taxes are harsh.

A. Flat 30% Tax on Profits

• If you make ₹100 profit, you pay ₹30 tax (+ cess).
• No Slab Benefit: Even if your income is zero, you pay 30% on crypto gains.
• No Set-off: Loss in Bitcoin cannot be set off against Profit in Ethereum.
  • Example:
    • Bitcoin Profit: ₹1 Lakh (Tax = ₹30k)
    • Ethereum Loss: ₹1 Lakh
    • Net Profit: ₹0
    • Tax Payable: ₹30,000. (Ouch!)

B. 1% TDS on Transactions

• Every time you Sell or Swap crypto > ₹10,000/year, 1% TDS is deducted.
• This kills high-frequency trading and liquidity.

3. VDA (Virtual Digital Assets)

The Govt calls Crypto "VDA". This includes:

• Cryptocurrencies (BTC, ETH)
• NFTs (Non-Fungible Tokens)
• Tokens

4. Risks You Must Know

1. Regulatory Risk: The Govt can ban it anytime (though unlikely now).
2. Exchange Risk: Indian exchanges (WazirX, CoinDCX) face banking issues. Deposits often get stuck.
3. Volatility: Bitcoin can drop 50% in a month.
4. Scams: "Doubling money" schemes using fake coins.

5. How to Invest Safely (If you must)

1. Allocation: Max 5% of your portfolio.
2. Platform: Use FIU-registered exchanges (CoinDCX, CoinSwitch, WazirX).
3. Self-Custody: "Not your keys, not your coins." Move long-term holdings to a Hardware Wallet (Ledger/Trezor).
4. Don't Trade: Invest for long term (HODL). Trading with 1% TDS + 30% Tax is mathematically hard to win.

7-Day Action Plan

Day 1: Check if your Crypto Exchange is FIU-registered.
Day 2: Download your "Tax Report" from the exchange for last year.
Day 3: Calculate your potential tax liability. (Remember: No set-off of losses).
Day 4: Read about "Hardware Wallets" (Ledger Nano S).
Day 5: Understand "Stablecoins" (USDT/USDC). They track the Dollar but carry risks.
Day 6: Unsubscribe from "Crypto Tipsters" on Telegram. 99% are scams.
Day 7: Decide your "Exit Strategy." At what price will you sell?

Quiz

💡 Final Wisdom: Crypto is the "Wild West" of finance. High risk, high reward. But in India, the Taxman always wins.