Cryptocurrency taxation in India has been definitively settled since Finance Act 2022 introduced a specific framework for Virtual Digital Assets (VDAs). Whether you trade Bitcoin, Ethereum, or any other digital asset, understanding your tax obligations is essential to avoid notices and penalties.
What Are Virtual Digital Assets (VDAs)?
The Income Tax Act defines VDAs to include any information, code, number, or token generated through cryptographic means, NFTs, and any other digital asset notified by the government. This covers Bitcoin, Ethereum, Solana, and all altcoins, as well as NFTs.
Tax Rate on Cryptocurrency Income
Under Section 115BBH, income from transfer of VDAs is taxed at a flat rate of 30% plus applicable surcharge and cess, regardless of holding period or income slab. There is no short-term or long-term distinction for crypto - all gains are taxed at 30%.
Key Rules Under the VDA Tax Framework
Rule | Detail |
|---|---|
Tax rate | 30% flat plus surcharge plus cess on all VDA gains |
Loss set-off | VDA losses cannot be set off against any other income |
Loss carry-forward | VDA losses cannot be carried forward to future years |
Cost of acquisition | Only the cost of acquiring the VDA is deductible |
Mining income | Taxable as income from other sources at market value on receipt |
Gifting crypto | Receiver pays tax if value exceeds INR 50,000 (gift tax rules) |
TDS on crypto | 1% TDS on transfer consideration above INR 50,000 per year (Section 194S) |
The 1% TDS on Crypto Transactions
Section 194S requires every person purchasing VDA to deduct TDS at 1% of consideration paid. On Indian exchanges like CoinDCX and WazirX, the exchange deducts this. For peer-to-peer transactions, the buyer must deduct and deposit TDS directly. This TDS appears in Form 26AS and is creditable against final tax liability.
Can You Offset Crypto Losses?
No. This is one of the harshest aspects of the VDA tax framework. If you make a profit on Bitcoin and a loss on Ethereum in the same year, you cannot net them. Bitcoin profit is taxed at 30% and the Ethereum loss cannot be deducted from it or from any other income. Crypto losses also cannot be carried forward.
Reporting Crypto in Your ITR
VDA income must be reported in Schedule VDA in your ITR. The schedule requires transaction-by-transaction disclosure including date of acquisition, cost, date of transfer, and sale consideration for each VDA transaction. Using a crypto tax tool or CA assistance is strongly recommended for active traders.
Foreign Crypto Exchanges and Schedule FA
Indian residents holding crypto on foreign exchanges must disclose these holdings in Schedule FA (Foreign Assets) of their ITR. Non-disclosure can attract penalties of INR 10 lakh per year and potential prosecution under the Black Money Act.
How PGA & Co. Can Help
At PGA & Co. Chartered Accountants, we assist crypto investors and traders with VDA income computation, Schedule VDA reporting in ITR, TDS reconciliation from exchange statements, foreign exchange disclosure in Schedule FA, and advance tax planning for high-volume traders.
Contact: +91 86998-87200 | info@pgaca.in | pgaca.in/contact
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