Introduction
Cryptocurrencies have emerged as a popular investment among Indian investors, especially during stock market volatility. However, with the ongoing ITR filing season for FY 2025-26, reporting crypto income is mandatory to avoid penalties, legal actions, or tax notices.
Key Takeaways
- 30% flat tax on crypto gains under Virtual Digital Assets (VDAs).
- Revised returns (Section 139(8A)) can rectify omissions in past filings.
- 1% TDS on transactions and 4% cess apply.
Step-by-Step Guide to Crypto Tax Filing
Step 1: Choose the Correct ITR Form
- ITR-2: For capital gains (occasional sales).
- ITR-3: For business income (frequent trading).
- ITR-4: Presumptive taxation (limited business income).
Step 2: Classify Crypto Income
- Capital Gains: Long-term investments.
- Business Income: Frequent trading.
- Other Income: Airdrops, staking rewards.
Step 3: Calculate Taxable Income
- Formula: Sale price – Cost of acquisition = Profit (taxed at 30%).
- Include: 4% cess + 1% TDS (total effective rate: 35%).
Step 4: Fill Schedule VDA
Report each transaction in the ITR’s Schedule VDA:
- Asset type (crypto/NFT).
- Purchase/sale dates.
- Amounts + TDS details.
Step 5: Disclose Foreign Assets (Schedule FA)
Required if using platforms like Binance/KuCoin:
- Exchange name, country, wallet balance.
Step 6: Verify TDS in Schedule TDS
- Cross-check 1% TDS from exchanges via Form 26AS.
Step 7: File Revised Returns (if needed)
- Use Section 139(8A) to correct past omissions.
Step 8: Maintain Records
- Transaction history, wallet addresses, exchange reports.
Taxation Rules for Virtual Digital Assets
- 30% flat tax on crypto/NFT profits (no deductions except acquisition cost).
- Unexplained income: Unreported crypto may attract penalties under Section 69A.
FAQs
1. What if I missed reporting crypto income in past ITRs?
File a revised return under Section 139(8A) before the deadline.
2. How is TDS applied to crypto transactions?
Exchanges deduct 1% TDS; verify via Form 26AS.
3. Are airdrops taxable?
Yes, treated as income from other sources.
4. Can I offset crypto losses against other income?
No, losses from VDAs cannot be set off against other income.
5. Is using foreign exchanges legal?
Legal, but mandatory disclosure in Schedule FA.
Compliance Tips
- Keep detailed records of all transactions.
- Report crypto income accurately to avoid penalties or legal scrutiny.
By following this guide, investors can ensure compliance with India’s crypto tax laws while optimizing their ITR filings.
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