Bitcoin
Bitcoin is the world’s first decentralised digital currency, launched in 2009 by an anonymous developer (or group) using the pseudonym Satoshi Nakamoto. It runs on a peer-to-peer blockchain network, allowing transactions without banks or intermediaries. For Indian investors, Bitcoin is treated as a virtual digital asset (VDA) for tax purposes and is held by millions through registered exchanges.
Key takeaways:
- Bitcoin is a decentralised digital currency on a public blockchain.
- Maximum supply capped at 21 million coins.
- Indian gains from Bitcoin are taxed at 30% under VDA rules.
- 1% TDS applies on Indian exchange transactions over thresholds.
- Highly volatile; not suitable for risk-averse investors.
How Bitcoin works
Bitcoin transactions are recorded on a public ledger called the blockchain. New bitcoins enter circulation through a process called mining — computers race to solve cryptographic puzzles, and the winner adds the next block to the chain. Anyone with the right software can verify transactions; no central authority is required.
Supply and scarcity
The Bitcoin protocol caps total supply at 21 million coins. Mining rewards are halved roughly every four years in events called “halvings”, slowing new issuance. By 2025, more than 19 million coins have already been mined. This scarcity is often cited as a key reason for Bitcoin’s store-of-value narrative.
Indian regulatory and tax position
| Aspect | Current treatment |
|---|---|
| Legal status | Not legal tender but not banned |
| Income tax on gains | 30% flat under VDA rules |
| TDS on transfers | 1% (on Indian exchange trades above thresholds) |
| Set-off of losses | Not allowed against any other income |
| Carry forward | Crypto losses cannot be carried forward |
How to buy Bitcoin in India
- Choose a SEBI-aware Indian exchange that complies with VDA regulations.
- Complete KYC with PAN, Aadhaar and bank verification.
- Fund the account via UPI or bank transfer.
- Place a market or limit order to buy Bitcoin.
- Store coins in the exchange wallet or in a personal hardware/software wallet for higher security.
Volatility and risk
- Bitcoin can move 5–15% in a single day on news or macro events.
- Tax rules in India are stringent — losses cannot offset other income.
- Custody risk: exchange hacks or operational failures can wipe out balances.
- Regulatory uncertainty in India remains a key risk.
Bitcoin in a portfolio
Many global investors treat Bitcoin as a non-correlated asset and hold a small allocation (1–5%) for diversification. Indian investors should weigh the harsh tax treatment and high volatility before allocating. Never invest borrowed money in crypto. Use cold-storage wallets for long-term holdings; keep only a small balance on exchanges for trading.
Frequently asked questions
Is Bitcoin legal in India?
Owning and trading Bitcoin is not illegal. It is taxed as a Virtual Digital Asset at 30% on gains.
How is Bitcoin different from other cryptocurrencies?
Bitcoin was first and remains the largest by market capitalisation. Others (Ethereum, Solana, etc.) have different technical features and use-cases.
Can I lose all my money in Bitcoin?
Yes — Bitcoin has experienced 50%+ drawdowns historically. Invest only what you can afford to lose.
Does Lemonn offer Bitcoin?
Lemonn focuses on Indian equities, F&O and mutual funds; for cryptocurrency, you would use a licensed crypto exchange.
