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 even mining funds.
Union Budget defined the taxes applied on the virtual digital asset. Still, 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 or not?”
Is crypto mining legal in India?
Crypto mining is poorly regulated, at least for now.
The Indian government has taken several steps to regulate the volatile currency. We have a provision to regulate income generated through digital currency. Anyone earning through crypto mining must disclose the profits as business profits or other income.
Mining is legal in India till now. However, it is taxable.
Crypto Mining is the method of creating new cryptocurrencies. Miners solve a complex mathematical problem that matches the transaction in currency.
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.
Do I need permission to mine crypto?
No. You don’t need permission to mine crypto. As per current laws, you don’t need any special license or authority to mine crypto. It would be best if you had 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 question arises “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.
Tax Implications Post-Budget (FY 2022-2023) For Mining
Union budget 2022 says miners must pay 30% of the total gain. The statement says virtual assets will now be taxed at 30%. Here, virtual assets refer to cryptocurrencies and non-fungibles tokens (NFT). How does this law be applicable in mining gains?
For instance, Mary successfully mined bitcoin. She added a block to the blockchain and earned a predetermined value of the mined currency. Suppose she received the 7.85 bitcoins as a reward.
Now, Mary is bound to pay 30% to the government.
Here are two key points you should know :
- First, as we already discussed, 30% taxes.
- Second, file mining gains as business earnings or other sources.
As of now, these are only things worth remembering.
Is crypto mining profitable?
Now, is it profitable to mine crypto despite taxes and government regulations? Several factors determine the value of crypto mining.
Apart from taxes, crypto mining’s value depends on the following factors :
Investment: Here, investment refers to the resources needed to mine. GPUs, systems, and advanced PCs are included in this list.
Okay, so how much does this equipment cost? The cost of a GPU starts at $995 and can go up to $10,000. This is only the cost of the GPU. The whole system costs even more.
Another factor that impacts crypto mining is the cost of electricity. Bitcoin mining requires 139 terawatt hours (TWh) of electricity per year. Electricity cost is a significant factor here. The cost of electricity directly impacts the miners.
Profits: Coming to profits, miners earn vast amounts of rewards. Yes. We must consider there is uncertainty in revenue, but the rewards they generate are incredibly exceptional.
The 30% tax implication in India resulted in a market crash. Still, the possibility and opportunities are endless. That’s the only reason, despite all the crash downs, more people are entering the market.
Crypto Mining in India
Crypto’s future in India depends on the rules and regulations including all the other factors mentioned above. For instance, the electricity cost in Russia is 6 cents per kWh. That is, it requires $11,600 to mine 1 Bitcoin.
Whereas in India, the same bitcoin mining costs $23,900 per Bitcoin. See the difference?
Indian crypto mining marketing is growing. But we can’t compare it with developed countries like Russia, Dubai, and the USA. Here, resources are less expensive. Also, there are no taxes on virtual earnings.
Therefore, these countries will have more growth rate than India for now.
Past trends in Crypto Mining
Crypto mining takes time and patience, but the results are also rewarding. Over the years, mining profitability has shown volatile behavior. Bitcoin mining hit its lowest in Nov 2022, soon after the FTX collapse. Still, specific trends are going in the right and good direction.
The value determines the profitability of any asset it provides. Most people are concerned about money or how to generate revenue.
Crypto mining is like an asset price. The higher the asset rises, the more profitable mining becomes. Now, the market is at its lowest. Soon as predictions say, it will rise again in 2023.
Is crypto mining legal?
Yes, crypto mining is legal. You have to pay a 30% tax on gains. That’s it. There is no other provision that restricts anyone from starting mining.
As of the current scenario, mining profits are less as compared to the previous year. But the overall opportunities are immense.
Although, crypto mining is expensive, including hardware, software, electricity, and human resources. The amount of time and energy it takes to show the actual result is enormous. Additional taxes also demotivates miners. Despite all the strict laws and regulations, people are entering the market. And mining is still profitable.
And when we talk about crypto taxes, how can we forget KoinX? Head over to KoinX to start calculating the taxes on your crypto portfolio.