How to Buy a Cryptocurrency in India?

Key takeaways

• The easiest way to buy cryptos in India is through crypto exchanges, both centralised and decentralised. Centralised exchanges provide a familiar user experience but take control over your assets, while decentralised exchanges allow for more freedom but have a steeper learning curve. A step-by-step guide is provided in the blog for buying crypto through exchanges
• It is essential to store your cryptos securely, preferably in a wallet where you control the private keys. Trusting only exchanges that provide proof of reserves and complying with Indian laws is crucial. The principle "Not Your Keys, Not Your Crypto" emphasises the importance of self-custody for long-term holdings.
• All gains from selling, trading, or swapping cryptos in India are taxed at a flat 30% plus a 4% surcharge, regardless of the nature of income or holding period. Additionally, a 1% Tax Deducted at Source (TDS) applies on crypto sales above certain thresholds. Crypto profits should be reported under Schedule VDA in the Income Tax Return (ITR).

If you had bought one bitcoin for around $10 dollars in 2012, it would be valued at around $70,000 in March 2024. This growth curve over just twelve years is plain insane, right? 

Now, you are someone who has heard plenty about how cryptocurrency in India is the future, and is finally ready to put a part of your savings into virtual assets; there’s just one problem, you are not sure where to start. Well, if how can I buy any cryptocurrency in India is your question, we have answers.

Before you begin to understand how to buy any cryptocurrency in India though, you have to put the potential returns and the tax obligations against each other, so you’re entirely aware of what you’re getting into.

Let’s start there.

The potential of crypto

When we say crypto, it’s natural for Bitcoin to pop into your mind immediately - after all, many of us see Bitcoin synonymously with the entire crypto space. ‘How to invest in bitcoins in India?’ is a commonly searched phrase online. Let’s take a look at the potential:

• Censorship-resistant medium of exchange: Of course, the origin of Bitcoin lies in this principle. Bitcoin is permissionless and there is no centralised entity controlling any transactions. This is particularly useful for non-profits- as you may remember, Wikipedia used to accept donations in crypto. Decentralised money basically democratises power, which makes it a good addition to your portfolio if you want to be future-ready.
• Store of value: As of the middle of March, 2024, Bitcoin has seen a growth of ~110,140,700% in its 15 years of existence, and it has broken into the top 10 assets by market cap in the world with an about $1.36 trillion market capitalisation. In terms of its capabilities as a store of value asset, Bitcoin is comparable to gold at this point, only lacking on the mainstream acceptance part so far. Further, as the asset has matured, its infamous volatility has reduced, as you can see in the chart below.

• Inflation hedge: At times of economic crisis, Bitcoin can be used as a reliable source to store your savings. This is because Bitcoin’s fixed supply keeps it inherently safe from the inflationary pressures most traditional assets fall prey to. Bitcoin’s mettle has been proven in economies like Argentina and Turkey, fraught with inflation. For example, Bitcoin has recently recorded a new all-time high against the Turkish Lira. 

How to buy a cryptocurrency in India: Avenues

The easiest way to buy crypto coin in India is through crypto exchanges. There are both centralised and decentralised options available for you- with differing benefits. The centralised exchanges provide a UX similar to web2 stock trading platforms, but in exchange, they take control over your assets, so you still need someone to approve your transactions.

Decentralised exchanges on the other hand allow you to transact and extract however you want, but there is no hand holding at all. You are solely responsible for your assets, and the UX can be complex, as web3 has not become completely user-friendly just yet. 

If you ask us, for a beginner, a centralised platform may be a better option just because it lends you a bit of familiarity before you navigate unknown waters. As for how to buy a cryptocurrency in India through these platforms, here’s a quick step-by-step guide for you!

• Visit the website or app for the trusted exchange of your choice and find the ‘Sign Up’ option.
• Most exchanges require you to simply put in your email address and a password for a quick sign up. Ensure that you have 2 Factor Authentication enabled with apps like Google Authenticator to keep your account secure after your sign up.
• You now have an account on the exchange. You would most likely be asked to complete a KYC (Know Your Customer) verification next.
• In the page to complete your KYC, provide details such as your name, date of birth, permanent address, and a proof of identity and residence- which is usually your Aadhar Card or PAN.
• Once you have submitted the KYC requirements, the exchange should get back to you in a few days after verifying your information.
• After you have verified your KYC, you need to fund your exchange account. While some crypto exchanges in India may allow you to link your bank account or deposit fiat money through other means like UPI and credit/debit cards, you should also have the option to deposit any crypto you may already have to your exchange wallet. Once the funding is done, you can begin trading or investing.
• Once you have earned your profits/bought your crypto, you would want to move them off the exchange and store it in another wallet or convert it into fiat for utmost security of your assets.
• Remember that when you trade through an exchange, they take a 0.2-0.5% commission usually on every buy or sell order you place. It is wise to compare the fee charged by several exchanges before settling on one. 

To keep your crypto secure, you need to know exactly how to safeguard them. Well, we have tips for you here too:

How to store your crypto

Just knowing how to buy any kind of cryptocurrency in India is not enough; you need to learn about storing your crypto as well. On centralised exchanges, you do not possess complete control over your assets. So any issues in a company’s management and any wrong actions on their end can put your investments in jeopardy, as happened with Vauld investors after they failed to recognise the market turn from bull to bear. 

It is essential as a rule to trust only those centralised exchanges who make their proof of reserves publicly available information. 

Further, some globally renowned centralised platforms like Binance, Kucoin, and OKX are now banned in India as they have failed to comply with money laundering laws, registration, and tax rules in the country. This is another lesson for you- only choose a centralised exchange after thorough research on its background and compliance with Indian laws.

In the decentralised world, there’s a common saying - Not Your Keys, Not Your Crypto. 

This basically means that either you store your crypto by yourself in a wallet only you know the private key for (crypto wallets are secured by a pair of keys, private key for transaction authorisation and accessing your wallet, and public key to be shared with others to receive transactions), or you stand to lose your earning. 

By this principle, even when you trade frequently on a centralised exchange, you should move your long term holding crypto portfolio to another wallet owned by you.   

Tax laws in India for crypto investments 

The final step to know before you start buying/investing in cryptocurrency in India is the relevant tax laws you have to abide by. Do read our detailed blog on crypto tax in India, but here’s a quick overview for you:

• All gains from selling, trading, or swapping any cryptocurrency in India is taxed at a standard 30%, plus a 4% surcharge. Whether this income is capital gains or business income, or short-term or long-term profits, the tax treatment does not change.
• Further, 1% (Tax Deducted at Source) applies on the sale of crypto worth more than Rs. 50,000 (or Rs. 10,000 in particular cases).
• No deduction can be made, aside from acquisition costs.
• Finally, any crypto profits can be reported under Schedule VDA in the ITR (Income Tax Return).

Now you have a comprehensive idea of the benefits you get out of investing in crypto, vs. the tax laws. Have you made up your mind? Well then, it’s finally time to start; but let us reiterate: always do your own research before making any investment decision.

Well, that was it from us on ‘how to buy a cryptocurrency in India.’ For more insights into the world of crypto, keep following the India Crypto Research  blog!