Crypto Tax Filing: 5 Key Rules Every Investor Must Know Before ITR Deadline to Avoid Penalties

As the financial year draws to a close, India's crypto investors are preparing to file their Income Tax Returns (ITR). With clear taxation rules now governing Virtual Digital Assets (VDAs) like Bitcoin, Ethereum and other cryptocurrencies, it is essential to be cautious, accurate and compliant.

Five Must Know Things for Crypto Tax Filing

Here are five key things every crypto investor should keep in mind while filing taxes as per the expert Sumit Gupta, Co-founder of CoinDCX.

1. Crypto Gains Are Taxed at a Flat 30% Rate

Since April 1, 2022, all gains from the sale of cryptocurrencies are taxed at a flat 30% under Section 115BBH of the Income Tax Act. This applies to profits made from buying and selling digital assets, with no distinction between long-term and short-term gains. Additionally, surcharges and 4% cess apply. No deductions are allowed except for the cost of acquisition.

2. 1% TDS Applies to Every Crypto Transaction

As per Section 194S, a 1% TDS (Tax Deducted at Source) is applicable on all VDA transfers. If you are using an Indian crypto exchange that is tax-compliant, the TDS is automatically deducted. If not, the responsibility to deduct and deposit the TDS lies with the individual. Non-compliance can lead to a penalty equal to the unpaid amount, interest of 15% per annum, or even imprisonment.

3. Choose Exchanges That Offer Tax Tools

Several Indian crypto platforms now offer features like auto-TDS deduction and built-in tax calculators. These tools help users track their transactions, calculate liabilities, and generate tax reports. Choosing a platform that partners with tax solution providers simplifies the filing process and ensures accurate reporting.

4. It's Not Just Trading - All Crypto Income Is Taxable

Tax liability in crypto isn't limited to trading. Income from mining, staking, airdrops, and even crypto received as salary is also taxable. For instance, staking rewards are considered regular income and taxed according to the individual's income tax slab. Investors should report all such income accurately to avoid issues during tax assessments.

5. New 'Schedule VDA' in ITR from FY26

Starting from the 2025-26 financial year, the Income Tax Return (ITR) forms will include a dedicated 'Schedule VDA' section. This will require taxpayers to report gains, transfers, and holdings related to digital assets. This move will increase transparency and allow better tracking of crypto-related tax disclosures.

According to Sumit Gupta, these developments indicate the government's commitment to creating a transparent and accountable framework for virtual digital assets in India. He believes this is a crucial opportunity for investors and traders to meet their tax responsibilities on time and support the evolution of a compliant and trustworthy crypto ecosystem.

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