Crypto Tax in India 2024: Understanding Tax Slabs, Rates & Compliance

Understanding Cryptocurrency Taxation in India

India’s cryptocurrency tax framework, introduced in the 2022 Union Budget, brought digital assets under formal taxation. With the crypto market expanding rapidly, understanding tax implications is crucial for investors. The Income Tax Act treats virtual digital assets (VDAs) as a distinct asset class, imposing specific rules that differ from traditional investments. Non-compliance can lead to penalties up to 100% of tax dues, making awareness essential for every crypto holder.

Tax Slabs for Cryptocurrency in India

India employs a flat tax structure for crypto gains, irrespective of income brackets:

• 30% Tax Rate: Applies to all profits from transferring VDAs (selling, trading, or exchanging crypto).
• 4% Health & Education Cess: Additional surcharge on the 30% tax liability.
• No Deductions Allowed: Expenses (like transaction fees) cannot offset gains, except the original acquisition cost.
• No Loss Set-off: Crypto losses cannot be balanced against other income sources.

Example: If you earn ₹1 lakh profit from Bitcoin sales, you pay ₹30,000 + ₹1,200 cess = ₹31,200 tax.

How Different Crypto Transactions are Taxed

1. Buying & Holding

No tax when purchasing crypto or holding it. Tax triggers only upon transfer.

2. Selling/Trading Crypto

Profits taxed at 30% + cess. Includes exchanges between cryptocurrencies (e.g., ETH to SOL).

3. Crypto Mining & Staking

Rewards are taxed as income at slab rates when received. Subsequent sales incur 30% tax on gains.

4. Airdrops & Forks

Considered income at market value upon receipt, taxed per your income slab. Future sales taxed at 30%.

5. Gifts & Donations

Recipients pay tax based on market value if received without consideration. Gifts to charities may qualify for deductions.

Calculating and Reporting Your Crypto Taxes

1. Determine Cost Basis: Original purchase price + acquisition costs (gas fees, etc.).
2. Calculate Gains: Sale value minus cost basis. Use FIFO method if assets bought at different times.
3. File ITR: Report gains under “Income from Other Sources” in ITR-2 or ITR-3.
4. Maintain Records: Preserve transaction history, wallet addresses, and exchange statements for 6 years.

Deadlines and Compliance for Crypto Taxes

• TDS (Tax Deducted at Source): 1% deducted by exchanges on transactions exceeding ₹10,000 per user daily (₹50,000 for specific cases).
• Advance Tax: Pay in quarterly installments if tax liability exceeds ₹10,000/year.
• ITR Filing: Submit by July 31 annually. Late filings attract ₹5,000 penalties.

Frequently Asked Questions (FAQs) on Crypto Tax in India

Is crypto legal in India?

Yes, but unregulated. Trading is legal with applicable taxes.

Can I offset crypto losses?

Losses can only be carried forward for 8 years to offset future crypto gains, not other income.

Are NFTs taxed differently?

NFTs fall under VDAs and follow the same 30% tax rule on profits.

Do I pay tax on crypto transfers between my wallets?

No tax if transferring to self-owned wallets without consideration.

How is foreign exchange crypto income taxed?

Global crypto earnings of Indian residents are taxable in India under the same slabs.

What if I fail to report crypto transactions?

Penalties include 50-200% of tax evaded plus prosecution risk under the Income Tax Act.

Disclaimer: Consult a tax professional for personalized advice. Tax laws may change.