Crypto Taxes In India: Step-by-Step Guide To Report And Avoid Penalties In ITR Filing | Tax News
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Crypto Tax In India: If you missed crypto income in earlier ITRs, file a revised return under Section 139(8A) before the deadline.
A complete guide to report crypto and other digital assets in ITR filing.
Crypto Taxation In India For ITR Filing 2025-26: Indian investors are increasingly viewing cryptocurrencies as viable investment options. In times of high volatility in the stock market, they are shifting their funds to digital assets in hopes of achieving significant returns.
However, as the tax season is ongoing for ITR FY2025-26, crypto traders must report any income from the sale and profit of cryptocurrencies and other digital assets. Failure to do so can result in notices from the Income Tax Department, penalties, interest on unpaid taxes, and potential legal action.
In the Union Budget of 2022, the government officially categorised digital assets, including crypto assets, as Virtual Digital Assets. The outcome of this decision was that income from the transfer of virtual digital assets such as crypto and NFTs (non-fungible tokens) will be taxed at a flat rate of 30 per cent.
If crypto assets stored in your wallet are not mentioned while filing your tax return, the Income Tax Department may treat them as unexplained income under Section 69A. If you missed including cryptocurrency income in previous ITRs, file a revised return under Section 139(8A) before the deadline.
Crypto Tax Filing In India
Step 1: Identify the Right ITR Form
If you have crypto income, you cannot use ITR-1.
Most crypto investors need to use:
ITR-2 (for capital gains from crypto, no business income)
ITR-3 (if crypto income is from business or trading frequently)
ITR-4 (if you’re using presumptive taxation and have limited business income)
Step 2: Classify Your Crypto Income
Capital Gains: If you’re holding crypto as an investment and selling it occasionally.
Business Income: If you’re a regular crypto trader or full-time investor.
Other Sources: Airdrops, staking rewards, etc., are treated as income.
Step 3: Calculate the Income
Gather all transaction details:
- Purchase price
- Sale price
- Date of transaction
- Exchange used
- Subtract cost of acquisition from sale price to get profit/loss.
Flat 30% tax on gains, no deduction allowed (except cost of acquisition).
Include:
4% cess
1% TDS (deducted at the time of transaction on exchange)
Step 4: Fill Schedule VDA in ITR
In the ITR form, go to the “Schedule – VDA” (Virtual Digital Assets).
Provide:
- Type of VDA (Crypto, NFT, etc.)
- Date of purchase & sale
- Amount received
- Cost of acquisition
- TDS deducted (if any)
Repeat for each transaction or provide consolidated figures if allowed.
Step 5: Report in Schedule FA (If using Foreign Exchanges)
If you used foreign crypto exchanges (like Binance, KuCoin), fill Schedule FA (Foreign Assets).
Disclose:
- Name of exchange
- Country
- Peak balance
- Closing balance
- Account number or wallet ID
Step 6: Include TDS in Schedule TDS
Go to Schedule TDS and cross-check if the 1% TDS deducted by the exchange appears.
If not auto-filled, manually add using Form 26AS or TDS certificate from the exchange.
Step 7: File a Revised Return (if applicable)
If you missed crypto income in earlier ITRs, file a revised return under Section 139(8A) before the deadline.
Step 8: Maintain Proper Documentation
- Keep the following ready:
- Full transaction history
- Wallet addresses
- Exchange reports (Binance, WazirX, etc.)
- TDS details/Form 16A
- Foreign exchange invoices (if applicable)
Documentation And Compliance
Crypto traders should prepare necessary documents, such as transaction history, wallet details, exchange reports, and TDS details, to avoid fines and further investigation by the Income Tax Department. The declaration of crypto earnings is crucial due to the ITR’s separate section under Section 2(47A), categorising them as “Virtual Digital Assets.”
Taxation On Virtual Digital Assets
In the Union Budget of 2022, the government officially recognised digital assets, including cryptocurrencies, as Virtual Digital Assets. Consequently, income from the transfer of these assets, such as crypto and NFTs (non-fungible tokens), is taxed at a flat rate of 30 per cent.
Taxes On Crypto And Similar Digital Assets
The tax rate, however, is not limited to only 30 per cent and there are other charges included in it as well. For example- if you have earned a profit of Rs 1,000 on the sale of a cryptocurrency amount, then post the deduction of 30 per cent tax, you will not get Rs 700. You will be subjected to a cess charge of 4 per cent and a 1 per cent tax deducted at source (TDS) which makes the total tax rate, i.e.- 35 per cent.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
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