As cryptocurrencies rise in popularity, Indian investors must navigate tax regulations. India’s crypto investors must report all VDA gains under Schedule VDA in ITR-2 or ITR-3 this filing season. A flat 30% tax applies, with strict penalties for non-compliance.
With ITR filing now live for FY 2025-26, crypto investors have one more mandatory task on their checklist. Failing to report Virtual Digital Asset transactions is no longer a grey area, it carries serious financial and legal consequences. Here is everything you need to know.
No change in tax rate
The tax rate on profits from transfer of Virtual Digital Assets is 30% with 4% health and education cess, which is equivalent to 31.2% effective minimum rate of tax. Surcharges are imposed at higher income levels. This rate remained unchanged in Budget 2026.
Importantly, this flat rate is not dependent on the asset’s holding period. No long-term or short-term treatment for VDAs is available that is comparable to that offered for listed securities. If you have been holding Bitcoin for 10 days or 10 years, the rate of 30% as per Section 115BBH is the same.
Reporting structure
Effective from FY 2025-26, investors will be required to report all crypto gains in the special Schedule VDA of ITR-2 or ITR-3. Each VDA transaction should be reported line by line including the date of acquisition, cost of acquisition, date of transfer and sale consideration for each transaction.
ITR-2 is the correct form to use for most of the people who had paid salaries and had traded in cryptocurrencies throughout the year. ITR-3 is used by people with business income. Capital gains are reported in Schedule VDA and income from crypto, like mining rewards or staking, is reported in Schedule Income from Other Sources. The due date of ITR will continue to be 31st July of the assessment year.
What can be deducted and what cannot
Deductions are only allowed for the cost of the asset. When calculating taxable income, no other costs or fees (such as transaction fees, brokerage fees, or other fees) may be deducted.
Losses also are limited. Losses in one VDA are not deductible against the gains in another VDA, or against any other income like salary, business income, equity capital gains. They also are not transferable to the next year. All profitable trades are taxed at the full rate, irrespective of losses on your other trades.
The 1% TDS
A 1% TDS is applicable on all transactions of VDAs exceeding Rs 10,000 during a financial year or Rs 50,000 for specified persons. This is for individual and institutional transactions. The TDS deducted by the exchange is reflected in Form 26AS and can be credited in the ITR.
There are several scenarios that many investors may not be aware of.
If you convert one cryptocurrency to another (such as converting ETH to SOL), the transaction is considered a transfer and will result in tax liability even if no rupees are exchanged. The sale consideration is deemed to be the fair market value of the crypto received.
If you receive crypto from a non-relative worth more than Rs 50,000, then it is taxable at the slab rates subject to Section 56(2)(x). Gifts from certain relatives are not exempt but the asset must be reported. If crypto is obtained as a prize, from mining or by an airdrop, it is subject to the slab rates applicable in that case and not 30% flat.
Why non-compliance is now riskier than ever
As of April 1, 2026, the crypto exchanges, custodians, and platforms will be obligated to provide user-level transaction statements to the Income Tax Department under Section 509(1). This allows ITD to automatically match your ITR with exchange records.
Any income earned in cryptocurrencies or digital assets that remain unreported in the tax return can now be taxed at 60% with additional surcharges and cess. Penalties for incorrect reporting vary between 50% to 200% of the tax due and can include up to seven years imprisonment for serious non-compliance. The CBDT has also stepped up its nudge programme by issuing a large number of notices to crypto traders who have not been reporting correctly.
Filing checklist
Investors must complete the trade history of all Indian exchanges before filing and must also obtain the trade history from any other international exchanges they have traded on, and include the cost of acquisition for each VDA on which they disposed of using the FIFO method and should fill in Schedule VDA with transaction level details. Investors with numerous trades can make use of tax calculation tools provided by platforms such as CoinDCX, Koinly, and ClearTax.
Note: This article is for informational purposes only and does not constitute tax or legal advice. Investors are advised to consult a qualified chartered accountant or tax advisor before filing.
