As India's cryptocurrency landscape evolves in 2025, traders must navigate a complex tax environment. Here's what you need to know to stay compliant.
Current Tax Structure
India considers cryptocurrencies and NFTs as Virtual Digital Assets (VDAs). A flat tax rate of 30% is levied on profits from trading, selling, or spending VDAs. This tax is further supplemented by a 4% health and education cess. This applies irrespective of the holding period, eliminating distinctions between short-term and long-term gains.
A 1% Tax Deducted at Source (TDS) is applicable on sale transactions exceeding Rs. 50,000 annually. This TDS is deducted by the buyer when paying the seller for the transfer of crypto. If the transaction occurs on an exchange, the exchange might deduct the TDS. If a taxpayer trades on foreign exchanges, they must manually deduct TDS and file their TDS returns.
No deductions are allowed except for the cost of acquisition. Losses from crypto cannot be offset against other income. Losses incurred from one virtual digital currency cannot be set off against income from another digital currency.
Gifting of digital assets will attract tax in the hands of the receiver. Airdrops are categorized under gifts and are taxable if the amount exceeds INR 50,000.
Taxable Events
A taxable event in crypto is any activity that creates a tax liability under Indian law and includes transactions that produce income, gains, or measurable benefits in fiat money. Key taxable events include: * Trading: Exchanging crypto for other crypto or fiat currency. * Selling: A 30% tax is payable on selling any crypto asset with a profit margin. * Exchanging: A similar 30% tax is also applied on such occasions. * Receiving crypto assets as gifts that exceed INR 50K are eligible for a 30% crypto tax.
Reporting Crypto Gains in ITR
For the financial year 2024-25, you will need to declare your cryptocurrency taxes using either the ITR-2 form (if reporting as capital gains) or the ITR-3 form (if reporting as business income). The new ITR forms include a specific section called 'Schedule VDA' for reporting cryptocurrency gains or income. Mandatory reporting requirements apply to both individuals and crypto exchanges. It is necessary to report all crypto transactions under a dedicated section in the Income Tax Return (ITR).
New Developments
Unreported crypto gains will be treated as undisclosed income and taxed at 60% under block assessment from February 1, 2025. The Union Budget 2025 introduces a new framework for mandatory reporting of crypto transactions.
India will adopt the Crypto-Asset Reporting Standard (CARF), a global standard for crypto tax reporting developed by the OECD, in April 2027. As part of the new global tax reporting guidelines, the Indian government will sign the Multilateral Competent Authority Agreement (MCAA) in 2026.
Impact of Regulations
These measures, coupled with the absence of loss offsetting provisions, have stifled liquidity and innovation, prompting a reevaluation of India's position in the global crypto ecosystem. The CBDT's enforcement efforts, including the use of AI-driven tools, have intensified scrutiny on unreported transactions. The proposed Crypto-Asset Reporting Framework (CARF), aligned with OECD guidelines, aims to enhance transparency while balancing tax integrity with market growth. The steady stream of official crackdowns on non-reportable trades shows that compliance matters.
