Crypto purchases may seem an easy task, but buying digital assets via an Indian exchange might be complicated for NRIs. Indeed, Indian traders can easily buy, sell, and hold crypto. But the case is not the same with NRIs. They may face extra KYC, banking, and foreign exchange requirements.
What Makes Crypto Trading Different for NRIs?
Notably, the main difference between Indian crypto traders and NRIs is not whether the latter can own digital assets. It is primarily based on how they can buy and sell these assets through Indian exchanges. As Indian crypto exchanges have specific rules for NRI customers, their trading requirements can be more complex than those for resident customers.
In addition, banking can also be challenging for NRIs. They cannot simply use an NRE or NRO account for crypto transactions. While these accounts can be used for other investments, crypto exchanges may not accept them. The crypto payment and withdrawal options of non-resident Indians mostly depend on the exchange rules and foreign-exchange laws.
Another major issue is Indian crypto tax policies. As the Indian government levies 30% tax on crypto gains and 1% TDS on transfers, NRIs will also face the same rules based on the transaction structure and tax status. According to the Income Tax Department’s Section 115BBH for non-resident taxpayers, “Gains from Virtual Digital Assets are subject to a 30% tax (along with applicable surcharge and 4% cess) under Section 115BBH.” This means that NRIs should consider the tax impact before trading on an Indian crypto exchange.
Can NRIs Open Crypto Accounts in India?
Under India’s current crypto and AML framework, NRIs can open accounts with an Indian crypto exchange. However, they will be subject to the exchange’s own KYC and eligibility requirements. Thus, non-resident customers may not have the same easy access as resident Indian users.
As Indian crypto exchanges have AML obligations, they must follow KYC and customer due diligence requirements. FIU-IND mandates VDA service providers to register as reporting entities to conduct KYC and other requirements.
For KYC, NRIs may need to provide documents such as a PAN card, passport, and proof of overseas residence. The initial step is to check whether an exchange supports NRI customers and what documents are required to open an account.
How Does FEMA Apply to NRIs Buying Crypto?
Interestingly, adds another layer of complexity to the rules governing NRIs’ crypto trading in India. As per the rules, non-resident Indians’ money and investments are subject to foreign exchange regulations. This makes it challenging for them to easily access the country’s crypto market via any Indian bank account.
NRIs cannot simply assume that they can use an NRO account for trading. While exchange rules vary, there are no major crypto exchanges in India that permit crypto transactions using NRO or NRE accounts.
At the same time, NRIs cannot simply transfer the crypto sale proceeds to an NRE account. They also cannot send the money abroad in the same way as permitted investments such as securities. In addition, the withdrawals depend on the applicable FEMA rules.
What Payment Methods Can Be Used?
Payment options are notably limited for this group of customers. Exchanges may need a verified bank account in the customer’s own name, while some do not accept NRE, NRO, or NRI bank accounts. For example, CoinDCX and ZebPay, two prominent crypto exchanges in India, do not accept NRE, NRO, or NRI accounts and require a resident Indian bank account for verification.
NRIs should also be careful while moving the sale proceeds abroad. According to the Reserve Bank of India, NRI’s have specific repatriation rules for permitted investments such as shares. These provisions cannot be automatically applied to crypto as it is not covered by the same NRI investment framework.
In simple terms, NRIs are not banned in the Indian crypto market. Instead, they are facing uncertainty due to the lack of clear rules.
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