Are Cryptocurrency Investments Allowed for NRIs?

I would be especially careful before using an Indian bank account to fund a cryptocurrency purchase.

An NRE or NRO account has specific rules governing the source and use of funds, and a bank may have its own compliance checks for transactions involving a crypto exchange. Do not assume that because the money is in your account, every type of transfer is automatically permitted.

The RBI has clarified that banks and regulated entities should not rely on its 2018 circular that was set aside by the Supreme Court in 2020 as a basis for restricting virtual-currency transactions. However, the RBI has also said that regulated entities must continue customer due diligence and comply with applicable KYC, anti-money-laundering and FEMA requirements, including those governing overseas remittances.

That distinction matters: the earlier circular was set aside, but this does not mean every crypto-related transfer is exempt from other laws or banking checks.

The RBI's 2021 clarification is available here:

Before moving money, I would ask the bank about its current transaction requirements and speak with a professional familiar with both FEMA and virtual digital assets. I would also keep the exchange's transaction records and proof of the source of funds.

One important point is that cryptocurrency taxation and permission to invest are two different questions.

India has specific income-tax provisions for income from transfers of virtual digital assets. Section 115BBH generally provides a 30% tax rate on income from such transfers, subject to the statutory calculation rules. It also restricts deductions and the setting off or carrying forward of losses. Section 194S provides for tax deducted at source on certain VDA transfers, where applicable.

However, the tax treatment for a particular NRI should not be decided only by looking at the headline rate. You need to consider whether the income is taxable in India, your residential status under the Income-tax Act, where the transaction is carried out, and any applicable treaty or foreign tax rules.

Keep records of purchase dates, acquisition cost, sale proceeds, exchange statements, wallet transfers, and fees. These records may be important if you need to explain a transaction to a tax professional or bank.

The Income Tax Department publishes the relevant provisions on its official website:

• Section 115BBH
• Section 194S

I would get advice on the exact facts before trading, particularly if you plan to use an offshore exchange.

The first thing I would check is the law in the country where you currently live. Being an NRI does not automatically mean you can use every cryptocurrency exchange or investment product available in India.

For example, an exchange may have different onboarding rules for Indian residents, non-residents and people living in the United States. Some platforms may not accept customers with a particular tax residence or citizenship, even if they accept Indian documents.

Before opening an account, check whether the platform accepts your actual country of residence, what identity and tax-residency documents it requires, and whether it permits withdrawals to your bank account. Do not use a false residential address to get around its restrictions.

Also, distinguish between buying crypto with money held abroad and moving funds from India to an overseas exchange. The second situation can raise additional foreign-exchange and banking questions.

I would not assume that an overseas exchange automatically makes the transaction compliant with Indian law, either. Your Indian tax obligations may depend on your tax residency, the source of the income and the relevant rules for the financial year.

I would get the country-specific position clear before depositing money.