How to Report Crypto Income in Your ITR: Tax Rates, Schedule VDA, TDS Rules and Filing Steps for Indian Investors
Indian Crypto investors must report their earnings from Bitcoin, Ethereum, Stablecoins, non-fungible tokens (NFTs), and other virtual digital assets in their income tax returns. The Income Tax Department has made it easy to file ITR-1, ITR-2, ITR-3 and ITR-4 online and offline for the Assessment Year 2026-27. However, in a majority of cases, the taxpayer would be required to have ITR-2 or ITR-3, depending on the type of activity. Here are a few steps to follow:
Step 1: Compile Every Crypto Transaction
Download transaction statements from all Indian and overseas exchanges, wallets, and peer-to-peer platforms for the financial year. Document the asset, date of acquisition, cost of acquisition, date of transfer, sale consideration, and transaction type.
Crypto-to-crypto exchanges must be tracked. Swapping Bitcoin for Ether, for example, involves the transfer of one virtual digital asset and should not be ignored merely because no rupees entered the bank account.
The official Schedule VDA calls for data on a transaction-by-transaction basis, such as the date of acquisition and transfer, acquisition cost, and consideration received.
Step 2: Calculate Taxable Crypto Income
Under Section 115BBH, income from VDAs is taxed at a flat rate of 30% along with applicable surcharge and 4% health and education cess. Only the cost of acquisition is deductible, not trading costs, internet costs, mining equipment or advisory costs.
Assume that an investor bought Bitcoin at Rs. 4 lakh and sold it for Rs. 5.5 lakh. The taxable income would be 1.5 lakh, producing basic tax of Rs. 45,000, before cess and surcharge.
Crypto losses are not deductible from salary, shares, property or other crypto gains and cannot be carried forward. Schedule VDA therefore reports a loss-making transaction’s taxable income as nil while aggregating positive transaction-level income.
Step 3: Select the Correct ITR Form
ITR-2 is filed in case the taxpayer does not have any business or professional income and has invested in cryptos. The ITR-2 utility of the Department also provides a specific schedule for entering the ITR data of Schedule VDA, which will then be transferred to the capital-gains schedule.
ITR-3 is to be used if the crypto activity is classified as a business income, organized or high-frequency trading done commercially. The classification will vary based on the taxpayer’s facts and transaction pattern, and accounting treatment.
Step 4: Reconcile TDS and Exchange Records
Under Section 194S, the tax deduction is on transaction consideration, rather than the investor’s profit, and is generally at a rate of 1%. Check the amount from Form 26AS and check the Annual Information Statement and avail the TDS credit in return.
Also Read: Crypto Tax in India 2026: 30% Tax, 1% TDS, and How to File It Correctly
Step 5: Report Gifts and Verify the Return
Crypto received as a gift may be taxable under “Income from Other Sources” when the applicable value exceeds Rs. 50,000, subject to exemptions such as gifts from specified relatives. The virtual digital assets are specifically included in the list of movable property.
Complete Schedule VDA, and prepare to reconcile with the tax payable, pay any self-assessment tax, and e-verify the return after completing Schedule VDA. Stakers, miners, and those with foreign wallets or more complicated DeFi deals should seek professional tax advice as different criteria may apply to them.
FAQs:
Which ITR form should crypto investors use?
Investors who report crypto as capital gains and have no business income generally use ITR-2. Those treating frequent or organised crypto trading as a business may need to file ITR-3.
What is the tax rate on crypto profits in India?
Income from transferring virtual digital assets is generally taxed at a flat 30% under Section 115BBH. Applicable surcharge and a 4% health and education cess are charged in addition.
Can crypto losses be adjusted against other income?
No. Crypto losses cannot be set off against salary, property income, equity gains or even profits from another VDA transaction. They also cannot be carried forward to future financial years.
Is TDS deducted on crypto profits or transaction value?
Under Section 194S, 1% TDS is generally deducted from the transaction consideration rather than the actual profit. Investors should reconcile the deduction with Form 26AS and the Annual Information Statement.
Are crypto gifts taxable in India?
Crypto received as a gift may be taxable under Income from Other Sources when its value exceeds Rs. 50,000. Exemptions may apply when the gift comes from specified relatives or under other eligible circumstances.
Disclaimer : Crypto News India does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.
