Crypto Investment in India: How to Earn Passive Income Through Yielding & Staking, Along With Tax and Risk Details

In recent years, India has emerged as one of the largest cryptocurrency markets in the world. With multiple centralized crypto exchanges making the process seamless, investing in digital assets is no longer limited to seasoned traders. Today, even a beginner can start with as little as ₹100 after completing a quick account setup and KYC verification.

A growing trend among Indian crypto investors is Systematic Investment Plans (SIPs) in blue-chip cryptocurrencies, allowing them to build holdings steadily over time. But beyond long-term appreciation, there’s another attraction—earning a steady passive income from crypto holdings.

Understanding the Legal and Tax Rules in India

In India, buying, selling, and holding cryptocurrency is legal, but it does not enjoy the same tax benefits as equities. Investors should be aware of the following tax obligations:

• 30% tax on profits from cryptocurrency transactions

• 1% TDS on every transaction

• 4% health and education cess

A key difference from the stock market is that crypto losses cannot be offset against gains from other assets. This means if you incur a loss in cryptocurrency trading, the entire burden falls on you, without any tax relief.

Failing to comply with reporting requirements can also invite penalties from the Income Tax Department, making it crucial to declare all crypto income in your ITR.

How to Earn Passive Income from Crypto in India

Even though cryptocurrencies are not recognized as legal tender and operate outside the traditional banking framework, investors can generate passive income through two primary methods:

1. Yielding

In crypto yielding, investors lend their digital tokens to borrowers—often traders who need extra capital for leveraged trades. In return, lenders earn interest rates that are typically higher than those offered by conventional savings accounts.

Many centralized platforms offer:

• Fixed interest rates for lending

• High-level security protocols to protect investor assets

Yielding allows investors to earn steady returns without selling their holdings, although returns can vary depending on demand and market conditions.

2. Staking

Staking involves locking your digital tokens on a Proof-of-Stake (PoS) blockchain network. In return, you earn a fixed percentage of tokens as a reward.

Benefits of staking include:

• Serving as a source of passive income

• Helping secure and operate the blockchain network

• Earning rewards directly in the form of crypto tokens

Staking can be an attractive option for long-term investors who plan to hold their assets anyway, but it does come with risks such as market volatility and potential lock-in periods.

Risks and Considerations

While earning passive income from crypto is appealing, investors should consider:

• Market volatility – Crypto prices can fluctuate sharply.

• Platform risk – Ensure the exchange or platform you use is reputable and secure.

• Liquidity constraints – Some staking and yielding programs require you to lock in funds for a fixed period.

• Tax liabilities – All income, including rewards from staking or interest from yielding, is taxable.

The Bottom Line

Crypto investments can indeed be a source of regular passive income in India through yielding and staking. However, understanding tax obligations, market risks, and platform security is essential before getting started.

Adopting a disciplined approach—such as diversifying your holdings, choosing reliable platforms, and staying updated on regulations—can help maximize benefits while reducing risks.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency markets are subject to high risk. Always consult a financial advisor before making investment decisions.