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Jul 15, 2025
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The concept of Bitcoin Exchange-Traded Funds (ETFs) has garnered significant attention globally, especially following the U.S. Securities and Exchange Commission's (SEC) approval of spot Bitcoin ETFs on January 10, 2024. This development has led to increased interest among Indian investors regarding the potential approval and availability of Bitcoin ETFs within India. Bitcoin ETFs have not received approval from Indian regulatory authorities such as the Securities and Exchange Board of India (SEBI) or the Reserve Bank of India (RBI). Consequently, Indian investors seeking exposure to Bitcoin ETFs must explore alternative avenues.
India's regulatory environment concerning cryptocurrencies remains complex and evolving. While the Supreme Court of India lifted the RBI's ban on cryptocurrency trading in March 2020, the government has yet to establish a comprehensive regulatory framework for digital assets. The absence of clear guidelines has led to uncertainty, with financial institutions often hesitant to engage with cryptocurrency-related products. This regulatory ambiguity extends to Bitcoin ETFs, which, despite gaining traction in markets like the U.S., have not been introduced or approved in India.
Despite the lack of domestic Bitcoin ETFs, Indian investors can still gain exposure to such financial instruments through international markets. The Liberalised Remittance Scheme (LRS) of the RBI permits resident individuals to invest up to $250,000 per financial year in foreign assets, including stocks and ETFs. This provision enables investors to allocate funds to Bitcoin ETFs listed on international exchanges.
To do so, investors can open accounts with foreign brokerage firms that offer access to these ETFs. It's important to note that remittances exceeding ₹7 lakh in a financial year are subject to a 20% Tax Collected at Source (TCS), which can be adjusted against the investor's overall tax liability. Additionally, gains from these investments are subject to taxation under Indian law, with short-term capital gains taxed according to the investor's income slab and long-term gains typically taxed at 20% with indexation benefits.
Investing in Bitcoin ETFs through international avenues carries specific tax implications. Direct investments in cryptocurrencies within India are taxed at a flat rate of 30%, with an additional 1% Tax Deducted at Source (TDS) on each transaction. In contrast, investments in foreign ETFs, including Bitcoin ETFs, are subject to capital gains tax based on the holding period. Short-term capital gains (for holdings less than 36 months) are taxed as per the investor's income tax slab, while long-term capital gains are taxed at 20% with the benefit of indexation. This structure can result in a more favorable tax outcome compared to direct cryptocurrency investments.
The approval of Bitcoin ETFs in markets like the U.S. has set a precedent that could influence regulatory decisions in India. The SEC's approval has been viewed as a significant step toward the mainstream acceptance of cryptocurrencies, potentially serving as a model for other countries. Indian regulatory bodies may consider these developments when formulating their policies. However, as of now, there is no official indication from SEBI or RBI regarding the approval of Bitcoin ETFs in India. Investors should stay informed about regulatory updates and be prepared for potential changes in the investment landscape.
While Bitcoin ETFs offer a regulated and convenient means of gaining exposure to Bitcoin's price movements, their approval in India remains pending. Indian investors interested in these financial products can utilize the Liberalised Remittance Scheme to invest in international markets, keeping in mind the associated tax implications and regulatory requirements. As the global financial landscape evolves, it's crucial for investors to stay informed and consult with financial advisors to navigate the complexities of cryptocurrency investments effectively.
