How to save tax on your Bitcoin investments in India, legally!
A way through the harsh tax reality of Bitcoin trading in India:
Live Events
Bitcoin ETFs: The Smart, Tax-Optimized, Regulated Choice
Why do we look at Bitcoin as a risky alternative?
Bitcoin ETF: The smarter choice for you!
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
Indian investors have enjoyed massive gains in Bitcoin , up by over 123% in the past year and currently trading at near ₹1 crore, yet they're burdened by a harsh tax regime. A 30% flat tax, 1% TDS on each trade, and a blanket disallowance of loss set-off have made direct crypto investing punitive and inefficient.Despite this, there is always a way through the tedious tax regime: there is a smarter, tax-efficient and legal way to invest in Bitcoin.Under current Indian tax rules, profits from Bitcoin trading are taxed at a flat 30% rate, plus a surcharge and a 4% cess. Every trade is subject to 1% TDS, irrespective of profit or loss. Worse still, losses can't be set off against any income, not even other crypto gains, and cannot be carried forward to future tax years.How is one even supposed to make a profit under this regime? This makes us feel like it's less of a tax law and more like a daylight robbery. This means even a prudent, long-term investor is treated like a high-frequency gambler. No tax efficiency, no loss planning, and no differentiation between long-term holding and speculative trading.The legal and strategic alternative? Bitcoin ETFs. These are listed exchange-traded funds that track Bitcoin's price but are treated differently under Indian tax law.Unlike direct investments in Bitcoin, which are classified as Virtual Digital Assets (VDAs), Bitcoin ETFs, structured as units of foreign mutual funds, enjoy a favourable classification. If held for over 24 months, gains are taxed as long-term capital gains at just 12.5%, far more investor-friendly than the 30% on VDAs. If sold earlier, short-term gains are taxed at your regular income slab.Another huge advantage: no 1% TDS. Bitcoin ETF transactions don't suffer from liquidity erosion like direct crypto trades do. Plus, losses from ETF investments can be set off against other capital gains and can also be carried forward to future years, something completely disallowed in direct Bitcoin investing under the current VDA regime as of now. For HNIs and serious investors, this structure can mean up to 60% in tax savings while keeping investments regulated and protected.While some platforms offer INR-settled Bitcoin futures, these instruments often operate in regulatory grey zones. They fall outside India's VDA definition but remain unregulated by SEBI, with no investor protection or redressal.Secondly, the collapse of exchanges like Vauld and the ongoing restructuring of WazirX, both Indian exchanges now in Singapore courts, highlight the dangers of trusting unregulated platforms. WazirX's alleged claim that ₹5,000 crore of investor funds are actually company-owned while shielding itself under Singapore law shows how Indian investors are left with no local protection.Moreover, these platforms pose full counterparty risk. Unlike NSE/BSE derivatives offerings, which have clearing corporations and capital adequacy rules, crypto futures platforms rely entirely on internal solvency, thereby remaining unchecked, unaudited, and uninsured.Even the supposed tax advantage is unreliable. Frequent crypto futures trading can attract business income classification, leading to the applicability of a significant compliance burden.In short, Bitcoin futures may offer a loophole, but they come at the cost of investor safety, regulatory compliance, and long-term viability. Bitcoin ETFs are unquestionably the better option for traders to invest in, while Bitcoin still carries remaining risk.For Indian investors looking to grow their wealth in a compliant, tax-efficient, and secure manner, Bitcoin ETFs offer the ideal solution. They combine the upside of digital assets with the structure and investor protections of traditional finance. Compared to direct crypto trading, Bitcoin ETFs allow investors to save up to 60% in taxes, avoid the 1% TDS, and claim loss set-off and carry-forward, benefits denied under the current VDA tax regime.There are platforms through which, Indian investors can now access US-listed Bitcoin ETFs via regulated brokers and GIFT City-compliant structures. In an environment of tightening regulations and ongoing failures of unregulated platforms, ETFs are not just a safer route; they're the only logical path forward.(The article is written by Srinivas L., CEO of 9Point Capital.): Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
6 minutes ago
- Mint
Why more equities won't save you from low withdrawal rates in retirement
Retirees are often drawn to a tempting idea: since equities typically deliver higher returns over the long run, a retirement portfolio with more equities will produce better outcomes. Wouldn't it be nice to escape the meagre 3% withdrawal rate by investing more heavily in equities? Unfortunately, it's not so straightforward. Beyond a point, increasing equity allocation will reduce, not raise, the withdrawal rate. This is due to a crucial but underappreciated concept: sequence of return risk. In portfolios that experience regular withdrawals, not just the returns but the order in which they are earned matter, which can have dramatic consequences. Also Read: Relying on rental income in retirement? Take these steps to protect yourself. The table shows how two retirees (A and B) experience the same average returns but in different sequences. Despite identical withdrawals, A (who faces early losses) ends up with just ₹59, while B (who sees early gains) ends up with ₹71—this is sequence risk at work. In a portfolio with no withdrawals, only returns matter—not the order in which they occur. This is because multiplication is commutative: 1 × 1.1 × 0.9 × 1.2 is the same as 1 × 0.9 × 1.2 × 1.1. But when you introduce regular withdrawals, you are now subtracting from the portfolio every year. In mathematical terms, you are combining subtraction with multiplication, and the commutative property breaks down. The arithmetic changes and the sequence begin to matter. High sequence risk A retirement portfolio with heavy equity exposure is likely to face substantial volatility and heightened sequence risk. In the accumulation phase, volatility can be a friend—it brings down average cost through disciplined investing. But in the decumulation phase, volatility becomes a foe. A 20% drawdown early in retirement can cause lasting damage, especially if the retiree is simultaneously withdrawing funds to meet expenses. Unlike a young investor, the retiree cannot 'wait it out". Also Read: How to prepare for retirement in a world of increasing life expectancy This can be illustrated by conducting simulations on retirement portfolios with varying equity allocation. We conducted multiple such simulations to check how the optimal withdrawal rates vary for different asset allocations. The findings are unambiguous. Withdrawal rates initially rise with greater equity exposure, peaking at 20–40%, but then begin to fall. Portfolios with higher equity allocation produced meaningfully lower safe withdrawal rates. This is not a quirk of Indian market data or a one-off observation. William Bengen, the American financial planner who introduced the '4% rule" in 1994, found the same. In his landmark study of historical US data, Bengen was surprised to find that safe withdrawal rates declined when equity allocations increased. He even noted that the worst outcomes were not produced by conservative portfolios with low equity exposure but by aggressive portfolios with too much equity. This insight wasn't isolated. The Trinity Study, an influential academic analysis, came to similar conclusions when it tested various asset allocations and their impact on withdrawal rates using US market history. Closer to home, my 2024 co-authored study with Rajan Raju had a similar conclusion. Using Indian data, we found that withdrawal rates initially rise with equity allocation but then begin to decline beyond a certain point. Also Read: How to build a ₹5 crore retirement corpus with ₹1.5 lakh monthly salary Though equities offer higher long-term returns, more equity does not always mean more retirement income. This is a paradox we need to wrap our heads around. Retirees should construct a portfolio with a balanced allocation that reduces volatility. If you have been smirking at retirees with good fixed-income allocations in their retirement portfolio, well, the joke may be on you. Ravi Saraogi, CFA, Sebi-registered investment adviser. and co-founder, Samasthiti Advisors.
Mint
6 minutes ago
- Mint
The poverty line has moved but have basic vulnerabilities in India eased?
According to recent World Bank data, extreme poverty in India fell sharply from 27.1% in 2011–12 to just 5.3% in 2022–23, suggesting that 269 million people have been lifted out of poverty. While this achievement is nominally and statistically significant, the finding prompts a deeper and more structural methodological question: Are we counting fewer people as 'poor' in India, or are we failing to capture the full spectrum of vulnerabilities that persist among people in relative poverty which discussions based on 'poverty line' measurement miss in scope and reality? Historically, poverty measurement in India relied predominantly on income or consumption. This approach universally classifies individuals as poor or non-poor based solely on monetary criteria, offering a limited view of deprivation. In India, the Tendulkar Committee and later the Rangarajan Committee refined these poverty lines to reflect changing consumption patterns, but still focused primarily on income criteria. However, over the last two decades, the conceptualization of poverty, its measurement and assessment have all evolved significantly. Also Read: Mint Quick Edit | Poverty isn't widespread but prosperity needs to be Multidimensional frameworks, including the UNDP's Multidimensional Poverty Index (MPI), highlight that poverty encompasses deficits in education, health and living standards. Much of India's recent poverty discourse has centred on updated metrics, including the World Bank's shift from a poverty line of $2.15 to $3 per day and methodological refinements such as the adoption of thslum e 'modified mixed recall period' (MMRP) in consumption surveys. These changes, while noteworthy, underscore a deeper tension between statistical representation and lived deprivation. As critiques argue, estimates that rely on projected data, especially in the absence of post-pandemic ground surveys, risk portraying a linear trajectory of progress that may not fully account for access-based or structural vulnerabilities. A victory, but for whom?: While incomes have risen, they have not translated into improved well-being when access to essential public goods such as healthcare, education, transportation and digital infrastructure remains unequal. For multitudes, these access gaps persist, Uttar Pradesh (UP), Maharashtra, Bihar, West Bengal, and Madhya Pradesh, states that together made up 65% of India's extreme poor in 2011–12, account for two-thirds of India's overall reduction in extreme poverty. Yet, our Access Inequality Index Report 2025, which ranks Indian states based on access to essentials across five pillars—basic amenities, healthcare, education, socio-economic services and legal recourse—reveals a more uneven picture. While West Bengal and Maharashtra show relatively better rankings as 'achiever' and 'front-runner' states, respectively, UP and Bihar remain in the 'aspirant' category. This means that despite reductions in poverty as measured by consumption or income, the majority of households in these states continue to lack reliable access to vital public goods. For instance, only 19% of households in UP and 21.5% in Bihar have access to clean cooking fuel. Just 22.4% of households in Maharashtra and 33.7% in West Bengal have at least one member covered by a health insurance or finance scheme. Also Read: Himanshu: India needs official poverty data for effective policymaking States such as Kerala, Goa and Tamil Nadu consistently rank high in access to essential public services, with Goa leading overall and topping categories like basic amenities and healthcare. For example, 90% of households in Goa live in pucca houses, compared to 83.4% in Kerala and 87.9% in Tamil Nadu. Also, 91.9% of households in Goa have access to piped water supply within their dwelling or yard, while child immunization rates stand at 84.1% in Goa, 84.5% in Kerala and 85.7% in Tamil Nadu. In contrast, states such as Bihar, UP, Jharkhand and Chhattisgarh lag far behind. These deprivations are critical to people's well-being and show that income thresholds alone are insufficient markers of progress. A household that marginally exceeds the poverty line but lacks clean water or reliable healthcare remains vulnerable. These forms of deprivation often remain invisible in conventional consumption data, yet they are pivotal in determining a household's ability to recover from shocks, invest in education or participate fully in economic life. Alternative readings: An analysis of household income data by Azim Premji University's State of Working India 2021 highlights the unequal economic impact of the covid pandemic. The lowest 10 percentiles saw a steep 27% decline in income, compared to 23% among the 40th-50th percentiles and 22% among the top 10 percentiles. Income losses were more pronounced in urban areas. And although the setbacks may appear modest, the absolute income reduction for low-income households has been profound. This financial distress coincided with a sharp increase in non-monetary deprivations. Also Read: India must redraw its poverty line to reflect economic progress The Hunger Watch survey reported in 2022 that 80% of respondents experienced some form of food insecurity, with 25% suffering severe distress (like skipped meals and hunger); 41% observed a decline in the nutritional quality of their diets, and 67% were unable to afford cooking gas in the month preceding the survey. A Pew Research Centre report in 2022 also estimated that about 75 million additional people in India fell into poverty due to the pandemic. The subsequent State of Working India 2023 study reaffirmed these patterns, documenting a 22% drop in cumulative household income from March to October 2020, with the poorest households disproportionately affected, driving a notable surge in poverty rates. While welfare programmes such as the PM Awas Yojana, Ujjwala Yojana, Jan Dhan Yojana and Ayushman Bharat have expanded coverage, and direct benefit transfers have improved matters, challenges persist. Access to resources does not always translate to adequacy; owning a gas cylinder does not guarantee regular refills. Many essential services remain underfunded, unevenly implemented or inaccessible, particularly in rural and remote areas. All this makes access inequality the emerging face of poverty in India. Ultimately, despite significant improvements in headline poverty metrics, a closer examination reveals a more complex reality. The persistence of access disparities, relative poverty and regional inequalities underscores the need for clarity on poverty today. We must pay attention to institutional capacity, political will and the equitable distribution of public goods. The authors are, respectively, dean and research analyst, O.P. Jindal Global University.
Mint
8 minutes ago
- Mint
Sensex, Nifty 50 rise for 4th consecutive session; investors earn ₹4 lakh crore— 10 key highlights
Indian stock market extended gains to the fourth consecutive session on Monday, June 9, on across-the-board buying amid largely positive global cues. The Sensex closed 256 points, or 0.31 per cent, higher at 82,445.21, while the Nifty 50 settled at 25,103.20, up 100 points, or 0.40 per cent. The mid and small-cap segments outperformed as the BSE Midcap and Smallcap indices rose 1.03 per cent and 1.19 per cent, respectively. The overall market capitalisation of BSE-listed firms rose to ₹ 455 lakh crore from ₹ 451 lakh crore in the previous session, making investors richer by about ₹ 4 lakh crore in a day. In the last four sessions, the Sensex and the Nifty 50 have jumped more than 2 per cent each, and investors have got richer by about ₹ 12 lakh crore. The recent rally in the market has followed healthy domestic macro prints, better-than-expected Q4 results and the RBI's bumper 50 bps rate cut. Positive global cues amid expectations that the US-China and US-India trade deals were near also influenced market sentiment. "The Indian stock market has been experiencing strength recently, backed by positive economic growth and better-than-expected fourth-quarter results. We could see a positive structure for the indices playing out, considering the liquidity in the capital markets continues to be fairly buoyant and the continuation of steady growth in the Indian economy," Jimeet Modi, founder and CEO of SAMCO Group, told Mint. 39 stocks ended higher in the Nifty 50 index, out of which Jio Financial Services (up 3.89 per cent), Kotak Mahindra Bank (up 3.25 per cent) and Bajaj Finance (up 2.69 per cent) ended as the top gainers. Shares of Eternal (down 1.86 per cent), ICICI Bank (down 1.73 per cent) and Titan Company (down 0.73 per cent) closed as the top losers in the index. (This is a developing story. Please check back for fresh updates.) Read all market-related news here Read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
