Is Cryptocurrency Mining Legal In India? Here’s What Experts Say About It
Crypto mining could be profitable, but there are certain caveats involved, explain Mudrex CEO Edul Patel and Unocoin CEO Sathvik Vishwanath.
By: Shayak Majumder | Published : 06 May 2022 12:47 PM (IST)|Updated : 06 May 2022 12:47 PM (IST)
Cryptocurrency mining is currently unregulated in India. ( Image Source : Getty )
New Delhi: Cryptocurrency mining, as the name suggests, is the process of creating new cryptocurrencies into circulation. A highly competitive process, crypto mining uses a proof-of-work method to verify and add new transactions to the blockchain. Since cryptocurrency in itself is still a mystical subject for many, it’s understandable that users may have a lot of questions about cryptocurrency mining. A major query among them is: Is crypto mining legal in India? And perhaps more importantly, is it profitable as a profession? ABP Live spoke to Mudrex CEO and Co-Founder Edul Patel and Unocoin CEO and Co-Founder Sathvik Vishwanath over email to figure out the various facets of cryptocurrency mining. Founded in 2018, Mudrex is a Y Combinator-backed platform for automated crypto trading. Unocoin, on the other hand, was founded in 2013 and claims to be India’s first entrant into the Bitcoin space.
Is cryptocurrency mining legal in India?
In India, cryptocurrency mining is an unregulated process at the moment, Patel told ABP Live. “There are no regulations to ban people from mining cryptocurrency. As of now, since public cryptos are mined using the miners’ own resources, there are no laws designed for this process.”
Cryptocurrency mining is legal in several countries around the world, including the likes of Canada, El Salvador, and the US. In India as well, cryptocurrency mining is not deemed illegal as of yet. However, it is taxable.
Vishwanath told ABP Live, “It is one of the activities where people utilise their processing power and electricity to process crypto transactions and get rewards for the same. It is a taxable event and it is quite unprofitable because of the general average temperature in India, so we don’t see much of such activities here.”
Do you need a permit to mine crypto in India?
No, you don’t need a special permit. As per Vishwanath, “There are no such licences and permissions required, as anyone can start crypto mining in India.” To mine crypto, all you need is a crypto wallet, good mining software, and most importantly, a powerful PC.
Patel shared that in March this year, Minister of State for Finance Pankaj Chaudhary said in the Parliament that the infrastructural costs required to mine Virtual Digital Assets (VDA) would not be considered as a cost of acquisition, which is not allowed as a deduction as per the provisions of the Act.
How much tax must one pay to mine crypto in India?
Rewards earned through mining crypto will be taxed 30 percent on total gains.
Is crypto mining profitable? How much can one earn?
Cryptocurrency mining can be profitable. However, there are certain caveats to keep in mind. Patel explained, “For instance, if a Bitcoin miner can successfully mine by adding a block to the blockchain, they will receive 6.25 Bitcoins as a reward. The reward earned on crypto mining will be taxed 30 percent on the total gains.”
Vishwanath, too, is unsure if crypto mining would be profitable for many in India, “…because the electricity, maintenance, rent, etc. is quite costly here given that the mining equipment generates a lot of heat and it actually needs cooling down, which is a costly affair in itself.”
Patel also suggested that crypto mining may not be too sustainable as “it can also decrease the lifespan of the graphic cards being used.” He also said that most people fear getting into crypto mining as a profession “as the market is volatile.”
What kind of a rig is needed to mine crypto? Is it easy to procure such a system in India?
According to Vishwanath, there aren’t any equipment manufacturers in the country who are putting together crypto-mining rigs in India, primarily because “it is not profitable here anyways.”
He explained further, “These rigs are usually supercomputers made of something called ASIC (Application Specific Integrated Circuit) chips which are solely designed to mine crypto. So, we will need processors which have such chips embedded to make the process possible in a competitive way.”
What are the downsides of crypto mining?
Both Patel and Vishwanath agree that the high utilisation of electricity is the biggest challenge faced by a miner in India.
“If we can get cheap electricity for, say, Rs 2 per unit, it can be considered profitable. On one hand, we don’t have that anywhere yet. And on the other hand, there’s also maintenance and data costs which add up as well,” Vishwanath said.
Will crypto mining get banned in India in the future?
“It is unlikely for crypto mining to be banned in India,” Patel said.
Vishwanath explained tha crypto mining “is just an activity where you are processing the transactions taking place on the blockchain and you get rewarded for it… I don’t see any illegal activity happening as far as mining is concerned, and it is not possible to carry out any kind of illegal activity as well, it is just about one using their computers and getting paid for the efforts, power, and variable cost that gets added.”
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