As digital assets like Bitcoin, Ethereum, and NFTs become more popular among Indian investors, understanding how to report them during ITR filing is essential. With strict taxation policies now in place, incorrect or missed reporting can lead to penalties, interest, or even legal action.
🚨 What the Law Says
In the Union Budget 2022, the Indian government officially classified digital assets as Virtual Digital Assets (VDAs). Income from the transfer of VDAs—including cryptocurrencies and NFTs—is taxed at a flat 30% rate, with
No deductions (except cost of acquisition)
4% health and education cess
1% TDS on all transactions, deducted at the source
If not reported properly, crypto holdings can be treated as unexplained income under Section 69A of the Income Tax Act.
📄 Step-by-Step: How to File Crypto Income
1. Select the Correct ITR Form
ITR-2: For capital gains (if you don’t have business income)
ITR-3: For business income from regular trading
ITR-4: If using presumptive taxation with small-scale business income
2. Classify Your Crypto Earnings
Capital Gains: Selling crypto held as an investment
Business Income: Active or professional trading
Other Sources: Earnings from airdrops, staking rewards, etc.
3. Calculate Profit or Loss
For each transaction:
Record purchase date and cost
Record sale date and price
Compute gain/loss: Sale Price - Cost of Acquisition
Apply:
30% tax
4% cess
Include TDS already deducted by the exchange
4. Fill Schedule VDA
In your ITR form:
Mention type of asset (crypto/NFT)
Add purchase and sale dates
Report amount received and TDS (if any)
5. Disclose Foreign Crypto Exchanges
If you've used platforms like Binance or KuCoin, report under Schedule FA:
Platform name and country
Wallet ID or account number
Peak and closing balances
6. TDS Validation
Check Schedule TDS to verify if 1% TDS deducted by exchanges appears correctly. If missing, manually input using Form 26AS or TDS certificates.
7. File Revised Return (If Missed Earlier)
Use Section 139(8A) to file a revised ITR if crypto income was not reported in earlier returns.
8. Maintain Complete Records
Keep organized documents such as:
Transaction history
Wallet and exchange reports
TDS/Form 16A proofs
Invoices from foreign platforms (if applicable)
⚠️ Risks of Non-Compliance
Missing crypto disclosures can trigger:
Income tax notices
Hefty penalties
Tax audits or prosecution in extreme cases
✅ Final Tips
File crypto gains correctly under the Virtual Digital Assets section
Use the appropriate ITR form depending on your source of income
Keep documentation for all transactions
Include TDS and foreign asset details
Digital wealth comes with digital responsibility. As crypto enters mainstream finance, accurate reporting ensures peace of mind and financial transparency.
If you want help generating your VDA Schedule or calculating capital gains for your ITR, I can assist you. Just let me know.
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