The Union Budget 2025 keeps the crypto tax in India unchanged, with a 30% tax on gains and 1% TDS on transactions. This blog covers how cryptocurrencies are taxed in India, key compliance rules, and the impact on investors. Stay informed to ensure proper tax reporting and avoid penalties.
Tax on income earned from selling cryptocurrencies for INR is charged at a flat rate of 30%. There is a TDS applicable on crypto transactions at 1%. This TDS gets deducted automatically in case of a transaction on an Indian exchange. However, if the crypto tax transaction is done through P2P or international platforms, the responsibility of TDS deduction and deposit lies with the buyer.
What Are Cryptocurrencies in India?
Cryptocurrencies, also called digital currencies, are currencies like conventional money; with them, it can be used to purchase and sell cashless goods and services. However, it gets very controversial, as it does not involve third parties like banks or any central authorities.
Currently, over 1,500 cryptocurrencies are actively traded. Popular cryptocurrencies include:
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (USDT)
- Solana (SOL)
- Binance Coin (BNB)
- USD Coin (USDC)
- XRP (XRP)
- Dogecoin (DOGE)
- TRON (TRX)
- Cardano (ADA)
- TON (Toncoin)
- AVAX (Avalanche)
- Chainlink (LINK)
- Bitcoin Cash (BCH)
- Polkadot (DOT)
- Litecoin (LTC)
Latest Update on Crypto Tax in India in Budget 2025
The Union Budget 2025 offers no redemption for crypto investors, maintaining the status quo of a 30% tax on gains and 1% TDS on transactions. This dampens liquidity, restricts retail participation, and crushes innovation in the sector.
How Crypto Tax Works in India
The tax rate for cryptocurrency income in India is 30% for FY 2022-23. For instance, ₹30,000 tax plus applicable surcharge and cess are applicable on earning ₹1 lakh through crypto. Selling any crypto asset profitably attracts the same 30% tax. Trading or exchanging crypto incurs the same 30% tax. 1% TDS will also be deducted for transactions above ₹50,000 for specified persons and above ₹10,000 for others.
Which Crypto Transactions Are Taxed in India?
Crypto transactions in India are subject to varying tax rules depending on their type. Here’s an overview:
| Transaction | Tax Treatment |
|---|---|
| Buying Crypto | 1% TDS deducted by the exchange (except for international & P2P trades). |
| Selling Crypto | 30% tax applies to any capital gains. |
| Trading Crypto for Crypto | Gains are taxed at 30%. |
| Holding Crypto | No immediate tax, but capital gains tax applies when sold. |
| Transferring Between Own Wallets | Usually tax-free, but proper documentation is needed for audits. |
| Airdropped Crypto | Taxed as income at applicable slab rates; 30% tax if later sold |
| Hard Forks | Taxed as income upon receipt; a 30% tax applies if sold. |
| Gifting Crypto | Recipients are liable for tax, except for gifts from close relatives. |
| Donating Crypto | Only cash donations qualify for deductions; any gains may be taxed at 30%. |
| Mining Rewards | Taxed as income at applicable rates; a 30% tax applies if sold. |
| Staking Rewards | Taxed as income at applicable rates; a 30% tax applies if sold. |
How To Calculate Tax on Cryptocurrency in India
When cryptocurrency is sold, any capital gains are subject to a 30% tax, whether converted to INR or exchanged for another crypto asset.
Selling Crypto for INR
- Tax: The flat 30% rates apply to profits earned in selling crypto for INR.
- TDS of 1%: TDS of 1% will be deducted. The process is automatically taken care of by Indian exchanges, while in P2P or international transactions, the buyer must deduct and deposit the TDS.
Trading Crypto for Another Crypto
- 30% Tax – Gains made from exchanging one cryptocurrency for another will be subject to a 30% tax.
- 1% TDS: There is a 1% TDS liability, and it is to be ensured by the seller that appropriate deducting and depositing is done.
TDS on Crypto Transactions
TDS on crypto transactions stands for Tax Deducted at Source, which makes sure that the traders or investors do pay taxes on every single transaction. As per Section 194S, the buyer must deduct 1% TDS before making the payment and deposit it with the central government.
Regarding TDS in India, from July 1, 2022, any purchase of crypto/NFTs is subject to a 1% TDS deduction under Section 194S. The buyer itself can compute TDS in the case that it is done through an exchange. Indian exchanges do the automatic calculation of TDS; however, if it is an international platform, you need to calculate and file TDS yourself.
- Peer-to-Peer Transaction: The buyer must deduct TDS and file Form 26QE or 26Q, as the case may be.
- For example, the purchase of crypto with INR via P2P or an international exchange. Crypto-to-Crypto Transactions: TDS at 1% for both parties. Example: Buying crypto converted with stablecoins.
DeFi Transactions in India
DeFi transactions in India have made lending, borrowing, and trading easy without banks, all happening within the purview of blockchain. Since the Income Tax Department does not have specific rules for DeFi, it treats them under the provisions applicable to Virtual Digital Assets (VDA).
- Income generated pursuant to these DeFi activities is added to the individual tax brackets for income tax upon receipt.
- This includes liquidity mining, governance participation, or reward tokens; referral bonuses; and earnings from platforms providing play-to-earn or browse-to-earn models, e.g., from Brave, Permission.io.
- A profit of 30% is levied as a tax on the amount earned from the sale, swapping, or use of tokens, based on normal crypto taxation in India.
How To File Your Crypto Tax?
File ITR-2 or ITR-3 for tax on cryptocurrency as income earned during the FY 2023-24 (AY 2024-25) is to be classified for tax. When any earnings from crypto gains are considered as capital gains, then ITR-2 is to be filed. In contrast, income from business or trading would require filing ITR-3.
- ITR-2: This is for showing the profits from cryptocurrencies as capital gains.
- ITR-3: This is for showing any income from crypto as business income.
Both forms include Schedule VDA for reporting gains from virtual digital assets. Vakilsearch experts can help with accurate tax calculations and smooth ITR filing, ensuring compliance without errors.
Tax on Airdrops as Google
Tax on airdrops, as Google defines it. Involves receiving cryptocurrency tokens or coins for free in selected wallet addresses. This is often used for marketing and liquidity during the early stages of a token, which is taxed at 30%, and for this purpose, it has to be reported under Income from Other Sources.
On what Amount will the Airdrops be Taxed?
- Tax on Receiving Airdropped Tokens: Airdrops are taxed as brought into the Rule 11UA fair market value at the time of receipt in exchanges or decentralised exchanges (DEX). This value is taxable at the rate of 30%.
- Tax on Selling, Swapping, or Spending Airdrops: In case of any sale, swapping, or even when such tokens are used for making payments, a 30% tax will be applicable to the profits made.
Example Points to Explain:
- Suppose Mr Bob received free ABC tokens worth 20,000 as an airdrop on April 1, 2022. Since it is not exchanged in any exchange or DEX, no tax is applicable.
- If Mr Bob gets 20,000 ABC tokens under an airdrop on April 1, 2022, and these tokens are then traded on an exchange or DEX for ₹10 each, he would have to calculate tax for ₹2,00,000 (20,000 × ₹10) at 30%.
Later, Bob sells these tokens for ₹5,00,000; it only considers the first ₹2,00,000 as the cost, and the remaining ₹3,00,000 will be taxed at 30%.
Tax on Mining Cryptocurrency
The mining involves validation and recording transactions on a blockchain through advanced computing systems or better-known mining hardware. Miners in a blockchain, a network of computers or nodes, actually compete with others to solve complex mathematical problems; the winner collects a reward in much sought-after cryptocurrency, varying per the respective network.
Taxation on Mining Rewards:
- Income from mining is charged a 30% flat tax.
- For the purpose of calculating taxable gains on its sale, the acquisition cost for the mined cryptocurrency would be treated as nil.
- Mining-related expenses such as electricity, set-up costs, etc., are not allowed to be deducted from taxable income.
On What Amount Will Crypto Mining Be Taxed?
- The crypto receipt: Where cryptocurrency is received on mining, market value as provided for under Rule 11UA for mining and receiving the price on the exchanges or decentralised platforms (DEXes) at receipt shall be treated as taxable income during the year of receipt. At this value, the 30% slab is applicable.
- Selling, Swapping, or Using Crypto: If these mined assets were to be sold, traded, or spent, any profit arising from selling, swapping, or using such assets would be equally taxed at the rate of 30%.
Specified Persons and Exemptions
For specified individuals, like individuals or a Hindu Undivided Family, a transaction is exempt from TDS if the total crypto trades do not cross ₹50,000 in a financial year. This exemption limit is ₹10,000 for all other taxpayers.
Filing and Compliance
- Particular Individuals: TDS is to be deposited through Form 26QE within thirty days of deduction. However, as this form is not yet accessible on the income tax portal, investors have to wait for further release by the Income Tax Department.
- Other Taxpayers: TAN is required for filing Form 26Q quarterly, and payments of TDS are to be made by the 7th of the next month on proper duty. Given the procedural hassles involved, consulting a tax expert for filing Form 26Q will be recommended.
- Claim TDS Credits: TDS can be later claimed as credit by the taxpayer at the time of filing income tax returns, which will, hence, be deducted from his overall tax liability.
Penalties for Non-Compliance
Section 271C: Failure to Deduct TDS
The failure to deduct TDS can attract a penalty equal to such TDS.
Section 276B: Failure to Deposit TDS
The TDS does not deposit with the government after deducting forms, severe penalties, imprisonment from 3 months to 7 years, and a fine.
New Penalties for Avoiding TDS
Indian authorities impose strict laws regulating compliance with TDS provisions, with the penalty as severe as an amount equal to the TDS and a maximum of 7 years of imprisonment in serious cases for any failure hereinafter.
Tax on Crypto Staking/Forging 30
A 30% taxation is levied on earnings that one derives from staking cryptocurrencies, and this tax is called Tax on Crypto Staking/Forging. When selling the staked cryptocurrency, a 30% capital gains tax is deducted from profits made from such sales.
Tax on Crypto Gifts
The tax on gifts depends on whether it is cash, immovable property or movable property. Under Budget 2022, virtual digital assets (VDAs) are movable property, including cryptocurrencies. Hence, a gift of cryptocurrency falls under “income from other sources” as per the tax slabs and thresholds for tax liability if the cumulative value exceeds ₹50,000. Criteria for Taxation on Gifts.
Gifting apps for cryptocurrencies include gift cards, crypto tokens, or paper wallets. Gifts from relatives can be kept tax-free. For example, if a crypto gift from someone not a relative exceeds a value of ₹50,000, it becomes taxable. In addition, all inheritances, wills, marriages, and transfers for death considerations also escape taxes.
Losses Incurred from Cryptocurrency Transactions
According to Section 115BBH, losses sustained on cryptocurrencies cannot be set off against any income whatsoever, including profits from other crypto transactions. Therefore, the burden of carrying forward or adjusting crypto-related losses for the previous year while filing ITR lies on the shoulders of the investor.
Moreover, expenses incurred by Indian investors in connection with crypto trading activities cannot be offset against their income, except for the cost of purchase.
For example, Mr X purchases Bitcoin for ₹60,000 but sells it for ₹80,000. He, however, purchased Ethereum for ₹40,000 and sold it for only ₹30,000. The exchange has trading fees of ₹1,000. Hence, taxes will be computed on this basis:
| Currency | Buy Price (₹) | Sell Price (₹) | Net Profit / (Loss) (₹) | Tax Rate | Tax Amount (₹) |
| Bitcoin | 60,000 | 80,000 | 20,000 | 30% | 6,000 |
| Ethereum | 40,000 | 30,000 | (10,000) | 30% | – |
| Total | 6,000 |
Crypto investment losses cannot be set off against the gain, so here the loss of ₹10,000 from Ethereum shall not be set against the gain of ₹20,000 from Bitcoin. As such, the whole profit of ₹20,000 is taxable at 30%. Tax is ₹6,000, accordingly. Besides this, the trading fee of ₹1,000 is not available for deduction.
Disclosure of Cryptocurrency Assets
The Ministry of Corporate Affairs (MCA) has made it compulsory to disclose profit or loss arising from virtual currency transactions in the notes to accounts of company financial statements. They are also to report the value of the cryptocurrency as of the balance sheet date. Accordingly, the amendments to Schedule III under the Companies Act became effective on April 1, 2021. This decree can be thought of as the first step of the government to regulate cryptocurrencies.
However, this mandate only applies to companies, and no such requirements exist for individual taxpayers. Nevertheless, all individuals must report the gains from cryptocurrencies and pay their respects in taxes.
For individuals, the question of whether crypto assets need to be declared in the asset and liability schedule remains unanswered. Currently, there is no specific requirement in the Schedule Asset and Liability for the disclosure of your crypto holdings.
Crypto Transactions and the Applicable Tax Rate
By interpretation of Section 115BBH, any gain made from trading in cryptocurrency as a business can be taxed at the rate of 30% with an additional cess of 4%. Moreover, under Section 194S, transactions with cryptocurrencies will entail a TDS deduction at the rate of 1 % on transfer of crypto assets made on and from July 1, 2022, if the total transactions in that financial year exceed ₹50,000 (or ₹10,000 in certain cases).
Conclusion
Crypto tax in India involves specific rates and reporting rules that investors must follow. Keeping accurate records and meeting tax obligations helps avoid penalties. As regulations change, staying informed is essential for compliance. Seeking professional advice can help with accurate filings and tax planning.
FAQs
Do we have to pay tax on cryptocurrency in India?
Yes, a 30% tax applies to crypto gains, plus a 1% TDS on transactions above specified limits.
How is the sale of cryptocurrency taxed in India?
Crypto gains are taxed at 30%, with no deductions allowed except the cost of acquisition.
How to avoid the Indian crypto tax?
There is no legal way to avoid crypto tax; compliance and tax planning are key.
Do I pay taxes if I transfer crypto?
Yes, transferring crypto may attract taxes depending on the jurisdiction and purpose of the transfer, such as capital gains or transaction fees.
How much crypto income is tax-free in India?
All crypto income is taxable, but TDS is not deducted for transactions below ₹50,000 or ₹10,000.
Where to show crypto income in ITR?
Report crypto income under 'Income from Other Sources' or as business income if traded frequently.
Are crypto transactions refundable?
No, crypto taxes are non-refundable, but excess TDS can be claimed back while filing ITR.
