If you've been investing in Bitcoin, Ethereum, or any other cryptocurrency, the taxman is watching. India has one of the most clearly defined crypto tax frameworks in the world now — and not knowing the rules isn't an excuse that'll hold up during an assessment. 

Here's everything you need to understand before your next ITR filing. 

How Does India Tax Cryptocurrency? 

Since the Finance Act 2022, crypto assets are classified as Virtual Digital Assets (VDAs) under Indian tax law. This means all profits from buying, selling, or transferring crypto are taxable — no exceptions. 

The rules are straightforward, but they hit hard: 

• 30% flat tax on all gains from VDA transfers — regardless of your income slab 

• 1% TDS deducted at source on transfer of Virtual Digital Assets once the aggregate value of transactions during the financial year exceeds ₹50,000 (for an individual or a HUF) or ₹10,000 (for others) 

• No benefit of basic exemption limit on crypto gains 

• No deduction allowed except the cost of acquisition 

In simple terms — if you bought Bitcoin at ₹2 lakh and sold it at ₹5 lakh, you pay 30% tax on ₹3 lakh.  

What Counts as a Taxable Crypto Event? 

Many investors don't realise how broad the tax net is. The following all qualify as taxable events: 

• Selling crypto for Indian Rupees (INR) 

• Trading one cryptocurrency for another (crypto-to-crypto swaps) 

• Using crypto to purchase goods or services 

• Receiving crypto as payment for work or services 

• Earning staking or mining rewards 

• Receiving crypto as a gift above ₹50,000 in value 

Can You Set Off Crypto Losses? 

This is where things get painful for most investors. Under the current law: 

• Losses from one VDA cannot be set off against gains from another VDA 

• Crypto losses cannot be set off against any other income — salary, business, or capital gains 

• Losses cannot be carried forward to future years 

So, if you lost money on Ethereum but made a profit on Solana, you still pay full tax on the Solana gains. There's no netting allowed. 

What About Crypto Received as Gifts? 

Crypto received as a gift is taxable in the hands of the recipient if the fair market value exceeds ₹50,000 in a financial year — unless it comes from a close relative or is received on certain specified occasions like marriage. 

TDS on Crypto: What Buyers and Sellers Need to Know 

Under Section 194S of the Income-tax Act, 1961 (corresponding to Section 393 of the Income-tax Act, 2025), a 1% TDS applies on crypto transactions. If you're trading on Indian exchanges like CoinDCX or Zebpay, the platform handles this deduction. However, if you're doing peer-to-peer (P2P) transactions, the buyer is responsible for deducting and depositing TDS. 

Missing this obligation can result in penalties — so P2P traders especially need to be careful. 

Which ITR Form Should You Use for Crypto Income? 

• ITR-2 — if crypto is treated as capital gains and you have no business income 

• ITR-3 — if you're a frequent trader and crypto income is treated as business income 

Choosing the wrong form can trigger a defective return notice from the Income Tax Department. 

Common Mistakes CA Firms See Every Year 

1. Not reporting small transactions — every transaction counts, regardless of amount 

2. Assuming crypto-to-crypto swaps aren't taxable — they are 

3. Missing TDS obligations on P2P trades 

4. Not maintaining proper transaction records — exchange statements, wallet histories, and cost basis records are all essential 

5. Waiting until the last minute — crypto portfolios with hundreds of transactions take time to reconcile properly 

How a CA Can Help With Crypto Taxation 

Crypto tax isn't just about filling in a number on your ITR. It involves: 

• Calculating accurate cost of acquisition across multiple exchanges and wallets 

• Identifying the correct tax treatment for staking, airdrops, and DeFi income 

• Ensuring TDS compliance for P2P and OTC transactions 

• Responding to notices from the Income Tax Department 

• Tax planning within the legal framework to minimise liability 

Getting this wrong can mean notices, penalties, and interest — all of which are avoidable with professional guidance. 

Final Word 

Crypto taxation in India is strict, and the rules aren't always intuitive. The 30% rate, the no-loss-setoff rule, and TDS obligations catch many investors off guard. Whether you're a casual investor or an active trader, filing your crypto taxes correctly is non-negotiable in 2026. 

Have a crypto portfolio you need help declaring? Our team of experienced CAs can help you file accurately and stay compliant — reach out today.