Understanding Crypto Taxation in India
Reporting cryptocurrency income is mandatory for Indian residents under the Income Tax Act. Since April 2022, India has enforced a 30% tax on crypto profits plus 4% cess, with 1% TDS on transactions. All crypto holdings qualify as virtual digital assets (VDAs), requiring disclosure regardless of exchange platform. Failure to report can trigger penalties up to 100% of tax owed.
Types of Crypto Income and How They Are Taxed
Different crypto activities incur distinct tax treatments:
- Trading Profits: 30% flat tax + 4% cess on net gains (sales minus purchase cost)
- Staking Rewards: Taxed as income at receipt value; subsequent sales taxed separately
- Mining Income: Treated as business income if professional; hobby mining taxed at slab rates
- Airdrops & Forks: Taxable as “income from other sources” at fair market value
- NFT Transactions: Subject to 30% capital gains tax on profits
Step-by-Step Guide to Reporting Crypto Income
Step 1: Calculate Taxable Income
Total all profits from crypto disposals during the financial year (April-March). Deduct allowable costs like transaction fees and acquisition expenses. Losses cannot offset other income.
Step 2: File ITR-2 or ITR-3
Use:
- ITR-2: For individuals with capital gains only
- ITR-3: If crypto trading is a business activity
Step 3: Report in Schedule VDA
Disclose:
- Gross transaction value
- Acquisition costs
- Taxable gains (auto-calculated)
Step 4: Pay Advance Tax
If tax liability exceeds ₹10,000, pay in installments by 15th June, 15th Sept, 15th Dec, and 15th March.
Essential Documents for Filing Crypto Taxes
- Form 26AS: TDS credits from exchanges
- Capital gains statements from platforms like CoinSwitch/WazirX
- Bank statements showing crypto transactions
- Purchase invoices and sale contracts
- Records of transferred assets between wallets
Consequences of Not Reporting Crypto Income
Non-compliance risks:
- Penalties up to 100% of tax due under Section 270A
- Prosecution with possible imprisonment
- Interest charges at 1% monthly on unpaid tax
- Tax notices triggering audits of past filings
Exchanges now share transaction data with tax authorities via SFT filings, making detection inevitable.
Frequently Asked Questions (FAQs)
Q1: Is transferring crypto between my wallets taxable?
A: No tax applies for transfers between your own wallets, but record all transactions for cost-basis calculation.
Q2: How are crypto losses handled in India?
A: Losses can only be carried forward for 8 years to offset future crypto gains. They cannot reduce salary or other income.
Q3: Do I need to report holdings if I didn’t sell?
A: Holdings themselves aren’t taxed, but you must disclose all transactions and income in your ITR. Exchanges report holdings to authorities.
Q4: What if I traded on international exchanges?
A: All global transactions must be reported. Convert foreign currency values to INR using RBI exchange rates on transaction dates.
Q5: Can I revise past crypto tax returns?
A: Yes, file revised returns under Section 139(5) within 2 years if you omitted crypto income. Penalties may still apply.
