India’s crypto tax framework now combines a flat levy with wider transaction reporting. Investors must report taxable virtual digital asset income accurately. The rules cover cryptocurrencies, tokens and non-fungible tokens classified as virtual digital assets.
Buying and holding crypto does not create tax by itself. Tax generally arises when an investor sells, swaps or spends an asset. Exchanging Bitcoin for another token can create a taxable event without any rupee withdrawal. Authorities can compare filings with data supplied by platforms and TDS records.
Crypto Gains Face 30% Tax and 1% TDS
Income from a VDA transfer attracts a 30% tax, plus applicable surcharge and 4% cess. The rate applies regardless of the taxpayer’s income slab or holding period. Taxpayers can deduct only the asset’s acquisition cost. They cannot claim trading fees, advisory costs or other expenses.
A loss from one VDA cannot offset profit from another VDA or other income. Taxpayers also cannot carry that loss into later years. Therefore, an investor may owe tax despite recording an overall portfolio loss.
A 1% tax deducted at source applies when covered payments cross prescribed thresholds. The limits are ₹50,000 for specified persons and ₹10,000 for other payers.
TDS does not replace the 30% tax. Taxpayers claim it as credit against their final liability. Exchange records and TDS entries also provide data for matching returns.
Schedule VDA Brings Trades into Tax Returns
Taxpayers report transfer income transaction by transaction through Schedule VDA. Official guidance confirms that ITR-2 and ITR-3 include this schedule. Records should show dates, quantities, rupee values and acquisition costs.
Selling crypto for rupees falls within the transfer rules. Crypto swaps and purchases made with crypto also involve transfers. Meanwhile, mining, staking, airdrops or work-related receipts may require separate income treatment before a later sale. The facts determine the correct category.
Residents with assets or income outside India must also review Schedule FA requirements. The Income Tax Department says taxpayers with foreign assets should use a return containing that schedule. ITR-1 and ITR-4 do not provide it. Foreign-platform users should obtain advice on how specific holdings should appear.
Accurate reporting requires data from every exchange, wallet and peer-to-peer trade. Taxpayers should compare those records with Form 26AS and the Annual Information Statement. A mismatch can lead to notices or further assessment.
New Reporting Rules Expand Transaction Visibility
India’s 2026 rules place new duties on reporting crypto-asset service providers. Rules 241 to 244 cover definitions, reporting and customer checks under Section 509. Form 167 provides the reporting format.
The framework requires providers to report relevant transactions and value them in Indian rupees. It also covers crypto-to-crypto transactions. Providers must retain prescribed records for at least seven tax years. These duties cover exchanges, brokers, dealers and similar intermediaries meeting legal tests.
Service providers can face a ₹200 daily penalty for missing required crypto transaction statements. A ₹50,000 penalty can apply to uncorrected inaccurate information or failed checks. These penalties target reporting entities, not ordinary investors.
Individual taxpayers face separate exposure for inaccurate returns. Under-reporting can attract 50% of tax payable on omitted income. Misreporting can attract 200% subject to statutory conditions. Investors should maintain complete records and consult a chartered accountant for foreign platforms, business activity or multiple wallets.
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.
