How to Pay Taxes on Crypto Income in India: 2024 Complete Guide

With India’s cryptocurrency market booming, understanding how to pay taxes on crypto income is crucial for investors and traders. Since the 2022 Union Budget, virtual digital assets (VDAs) like Bitcoin, Ethereum, and NFTs fall under specific tax regulations. This guide breaks down everything you need to know about crypto taxation in India – from calculating liabilities to filing returns – helping you stay compliant and avoid penalties.

Understanding India’s Crypto Tax Framework

India’s Income Tax Act treats cryptocurrencies as Virtual Digital Assets (VDAs) with distinct rules:

• 30% Flat Tax: All profits from crypto transfers (selling, trading, spending) are taxed at 30% + applicable cess/surcharge.
• No Deductions: Expenses (like transaction fees) can’t be deducted from taxable income except the original acquisition cost.
• 1% TDS (Tax Deducted at Source): Applicable on crypto transactions exceeding ₹10,000 per transaction or ₹50,000 annually per user (Section 194S).
• Loss Set-off Prohibited: Crypto losses can’t offset gains from other income sources (stocks, real estate, etc.).

What Qualifies as Taxable Crypto Income?

You must report these common crypto activities in your ITR:

1. Trading Profits: Gains from buying/selling crypto on exchanges (e.g., WazirX, CoinDCX).
2. Staking Rewards: Income from locking crypto to support blockchain networks.
3. Airdrops & Forks: Free tokens received must be declared at fair market value.
4. Crypto Mining: Rewards earned through mining are taxable as income.
5. NFT Sales: Profits from selling non-fungible tokens.
6. Receiving Crypto as Payment: If you’re paid in crypto for services/goods.

Step-by-Step Guide to Calculate Crypto Taxes

Follow this process to determine your tax liability:

1. Track All Transactions: Use tools like KoinX or CoinTracker to log buys, sells, transfers, and rewards.
2. Calculate Cost Basis: Original purchase price + acquisition costs (gas fees, etc.).
3. Determine Capital Gains: Selling Price – Cost Basis = Taxable Profit.
4. Apply 30% Tax: Multiply total profits by 0.30.
5. Include Surcharge & Cess: Add 4% health/education cess on the tax amount.

Example: If you bought 1 ETH for ₹1,50,000 and sold for ₹2,00,000:
Profit = ₹50,000
Tax = ₹50,000 × 30% = ₹15,000 + ₹600 (4% cess) = ₹15,600 total tax

Filing Your Crypto Taxes: Key Steps

• Form Selection: File using ITR-2 or ITR-3 depending on income sources.
• Schedule VDA: Report all crypto gains under “Schedule Virtual Digital Assets” in your ITR.
• TDS Credits: Claim credit for TDS deducted by exchanges using Form 26AS.
• Deadline: Submit by July 31st (unless extended) for the previous financial year.

Penalties for Non-Compliance

Failing to report crypto income can lead to:

• 50-200% penalty on unpaid tax under Section 270A
• Prosecution with possible imprisonment (Section 276C)
• Interest charges at 1% monthly on overdue taxes

Frequently Asked Questions

Do I pay tax if I transfer crypto between my wallets?

No tax applies on transfers between your own wallets, but the 1% TDS may still be deducted by exchanges during the transfer.

How is crypto taxed if held long-term?

India doesn’t differentiate between short-term and long-term holdings. All gains are taxed at 30% regardless of holding period.

Can I carry forward crypto losses?

Losses can only be carried forward for 8 years to offset future crypto gains – not other income types.

Are foreign crypto exchanges reportable?

Yes! Income from international platforms (Binance, Coinbase) must be declared in your Indian tax return.

Is TDS refundable if I have no tax liability?

Yes, excess TDS can be claimed as a refund when filing your ITR if your total tax liability is lower than deducted amount.

Pro Tips for Compliance

• Maintain transaction records for 6+ years
• Reconcile exchange data with Form 26AS quarterly
• Use crypto tax software for accurate calculations
• Consult a CA for complex cases like DeFi or cross-border transactions

Staying compliant with India’s crypto tax rules protects you from legal issues while legitimizing your investments. As regulations evolve, always verify updates via the Income Tax Department’s official channels or trusted tax advisors.