India has embraced cryptocurrency with cautious regulation, and one of the most significant aspects of this regulation is crypto taxation. If you are trading, investing, or otherwise transacting in cryptocurrencies in India, understanding your tax obligations is essential. Here's a comprehensive look at how crypto tax works in India, who is liable, and how much you need to pay.
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1. Overview of Crypto Tax in India
In the Union Budget of 2022, the Indian government officially recognized Virtual Digital Assets (VDAs)—which include cryptocurrencies and NFTs—and introduced a formal tax regime, effective April 1, 2022.
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2. Who Has to Pay Crypto Tax?
You are liable to pay crypto tax in India if you fall under any of the following categories:
Retail crypto investors buying and selling coins like Bitcoin, Ethereum, or altcoins.
Traders actively buying/selling crypto for short-term gains.
Miners who mine cryptocurrencies and then sell them.
NFT creators and sellers.
Businesses or startups accepting crypto as payment.
Airdrop recipients or those receiving crypto as a gift.
In essence, any Indian resident or entity who transacts in crypto assets is subject to taxation under the current laws.
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3. Crypto Taxation Structure
a. Flat 30% Tax on Gains
A flat 30% income tax is levied on profits made from transferring virtual digital assets (VDAs).
No deductions (other than the cost of acquisition) are allowed.
This rate applies regardless of your income tax slab.
Example:
If you bought a token for ₹1,00,000 and sold it for ₹1,50,000, your gain is ₹50,000.
Tax = ₹50,000 × 30% = ₹15,000 (plus surcharge and cess, if applicable).
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b. 1% TDS (Tax Deducted at Source)
From July 1, 2022, a 1% TDS is applicable on the sale of crypto assets above certain thresholds:
₹50,000 per year (for individuals audited under I-T Act or HUF with income > ₹50 lakh).
₹10,000 per year (for others).
TDS is deducted by the crypto exchange or the buyer (in peer-to-peer transfers).
Example:
If you sell crypto worth ₹1,00,000, TDS = ₹1,000 is deducted upfront and reported in your Form 26AS.
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c. Gift Tax
If you receive crypto as a gift, it may be taxed under the Income from Other Sources head if the value exceeds ₹50,000 and is not from a relative or on special occasions.
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4. Key Exemptions and Clarifications
Loss Set-off Not Allowed: You cannot offset losses from one crypto asset against gains from another or from other income heads.
No Carry Forward: Crypto losses cannot be carried forward to future years.
Airdrops and Mining: Crypto received via airdrops or mining is taxable under “Income from Other Sources” at applicable slab rates, and taxed again when sold under the 30% rule.
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5. Reporting Crypto on Income Tax Returns (ITR)
Gains from crypto trading must be reported in Schedule VDA in ITR forms (from AY 2023–24 onwards).
TDS deducted can be claimed as credit while filing returns.
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6. How to File and Pay
Maintain detailed records of all transactions, including purchase price, sale price, date, wallet addresses, and exchange used.
Report your crypto income under the appropriate ITR form (ITR-2, ITR-3 depending on your income type).
Use platforms like Zerodha Coin, KoinX, or ClearTax to simplify tax calculations.
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7. Penalties for Non-Compliance
Non-payment or under-reporting of crypto taxes can attract penalties, interest, and even prosecution under the Income Tax Act.
The government may scrutinize wallets, exchanges, and bank accounts for unreported crypto gains.
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8. Future Outlook
While India’s taxation framework on crypto is currently strict, it provides regulatory clarity. There's growing demand from industry players to revise the 30% flat tax and allow loss set-off, especially as the country explores its own CBDC (Central Bank Digital Currency) and considers broader crypto regulation.
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Conclusion
If you're dealing in cryptocurrencies in India, tax compliance is non-negotiable. The 30% flat tax on gains and 1% TDS on transactions make it crucial to keep accurate records and understand your tax liability. Consult a tax advisor or CA for personalized guidance and ensure you meet all filing requirements on time.