Is Crypto Mining Legal In India? - KoinX (2024)

Cryptocurrency mining has become a hot topic worldwide due to its potential for earning digital currencies by solving intricate mathematical problems. However, the legality of crypto mining could be more consistent across countries.

In India, the legal standing of crypto mining has also been a topic of discussion and uncertainty. The Union Budget of 2022 defined the taxes on virtual digital assets like cryptocurrencies. However, there are many areas where government authorities over cryptocurrency are unclear. One of them is crypto mining.

Crypto miners are still confused about “Is crypto mining legal in India?” The answer to this has been explained in this article.

India’s journey with crypto has encountered regulatory challenges, causing uncertainty about the country’s stance on this virtual digital asset. The stance remains the same for people involved in crypto mining in India.

For those unfamiliar with the term, crypto mining involves the creation of new cryptocurrencies by verifying transactions on the blockchain platform. Now, let’s clear up any confusion and address common questions to understand the situation comprehensively.

Most Indian miners jumped out of the crypto market when the Indian government imposed a 30% tax on crypto. Investors and start-up founders took off their investments, including trading, investing, and mining funds.

Crypto mining is poorly regulated, at least for now.

The Indian government has taken several steps to regulate the cryptocurrency in the country. Anyone earning through crypto mining must disclose the profits as business or other income.

Coming to the question of “Is crypto mining legal in India?” The answer is Yes. Mining is legal in India till now. However, it is taxable.

Suppose the miner is successful in tracking the transaction. In return, the miner receives some amount of cryptocurrency. Mining is a method to generate new assets. Although, there is nothing illegal in mining except the cost of acquisition. In simple terms, we can say mining gives the freedom to generate assets. We need to determine the cost of acquiring the self-generated asset.

Besides, Section 55 of the Indian constitution states the provision of the cost of acquisition of assets. The Indian government hasn’t made any amends about mining. Thus, crypto mining is legal. You don’t need special permission to mine cryptocurrency.

As mentioned earlier, the legal aspects of Bitcoin mining in India align with the regulations applicable to other cryptocurrencies. But for those considering diving into individual Bitcoin mining, it’s essential to be aware of some critical factors.

To begin with, aspiring Bitcoin miners should be prepared to invest in costly Application-Specific Integrated Chips (ASICs). Additionally, they’ll face the challenge of dealing with a high difficulty rate, making the mining process more complex.

If the prospect of these challenges doesn’t discourage you, keeping meticulous records of all expenses and income related to your mining activities is crucial. This documentation is necessary because you must comply with tax regulations outlined in the Income Tax Act 1961.

No. You don’t need permission to mine crypto. Per current laws, you don’t need any special license or authority to mine crypto. It would be best to have the crypto wallet, mining experience, and required resources/software to mine crypto.

Anyone with resources and a few mining skills can start their mining journey.

For the most part, we like good things. Our first concern is profit. Various questions arise: “Even though there is a 30% tax, is crypto mining profitable?” “What are the current market trends?” “What is the future scope?“

We will go through each point one by one.

Here’s the lowdown on how crypto mining is taxed in India:

• You’ll be taxed on the fair market value (FMV) of the crypto you mine at your income tax rate. This applies the day you receive the coins, not when you sell them.
• Get ready for a twist: the cost of mining (electricity, hardware, etc.) is not considered when calculating your taxable income. Yes, you read that right.

• Capital Gains Tax? When you sell your mined coins, you’ll be taxed on the profit, calculated as the difference between the selling price and the FMV on the day you receive them.
• The profit is taxed at a flat 30% rate, regardless of your income bracket.

• TDS (Tax Deducted at Source): Be aware that a 1% TDS is levied on transactions exceeding ₹50,000 (or even ₹10,000 in some cases) when you sell or transfer your mined coins.

• Bitcoin: Mining the kingpin might seem like a jackpot, but the fierce competition and the hardware demands are brutal. You’ll need top-tier rigs and likely join a mining pool, splitting the rewards.
• Altcoins: Some lesser-known gems offer higher profitability, but their price volatility can be a heart attack waiting to happen. Do your research, choose wisely, and be prepared for a bumpy ride.