Understanding Crypto Taxes in India for 2025
As cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) continue to grow in popularity, India has established a clear framework for their taxation. These digital assets, classified as Virtual Digital Assets (VDAs) under the Income Tax Act, 1961, are subject to strict regulations and oversight. Here’s what crypto enthusiasts and traders need to know for the financial year 2024-2025.
How Are Cryptocurrencies Taxed in India?
India applies a unique tax regime to cryptocurrency transactions, introduced through the Income Tax (No. 2) Bill, 2025. This framework imposes:
- 30% tax on gains: Profits from crypto transactions are taxed at a flat 30% under Section 115BBH.
- 1% TDS: A 1% tax deducted at source (TDS) applies to all VDA transfers, regardless of profitability, under Section 194S.
Taxable events include trading, selling, or converting cryptocurrencies into fiat money or other digital assets. However, transferring crypto between personal wallets or merely holding assets is not taxable since these don’t result in gains or profits.
Key Agencies Overseeing Crypto Taxation
In India, multiple authorities collaborate to ensure tax compliance and curb illegal activities:
- Income Tax Department: Enforces tax laws and audits.
- Central Board of Direct Taxes (CBDT): Frames tax policies.
- Financial Intelligence Unit (FIU-IND): Monitors platforms for anti-money laundering (AML) measures.
- Reserve Bank of India (RBI) and SEBI: Provide broader regulatory guidance.
Crypto traders using foreign exchanges must also report their earnings in Indian income tax returns (ITRs). This ensures compliance with the Foreign Exchange Management Act (FEMA).
Calculating Your Crypto Tax
To determine your tax liability, calculating the cost basis of your assets is crucial. The cost basis includes:
- Purchase price of the asset.
- Associated expenses (e.g., transaction fees, wallet charges).
Traders may use methods like first-in-first-out (FIFO) or last-in-first-out (LIFO) to calculate their profits accurately. Crypto-to-crypto trades are also taxable, as they involve the sale of one asset to acquire another, both valued in Indian rupees at the time of the transaction.
Filing Requirements for Crypto Traders
Taxpayers are obligated to report all crypto transactions, regardless of whether they result in gains or losses. Starting in FY 2025-26, a new “Schedule VDA” will require the reporting of every individual transaction. Accurate record-keeping—such as exchange statements, wallet addresses, and fair market valuations—is essential to ensure transparency during audits.
Key deadlines include:
- July 31, 2025: For individuals not requiring audits.
- October 31, 2025: For businesses requiring audits.
Pitfalls to Avoid
Indian law does not provide tax relief for crypto losses due to hacks or theft. Additionally, crypto gifts are taxable if the value exceeds ₹50,000, except in cases involving close relatives or specific occasions.
Non-compliance comes with serious repercussions, including interest on unpaid taxes, fines for late filing, and even legal prosecution for deliberate evasion.
Tools to Simplify Crypto Taxation
Managing crypto taxes can be challenging, but specialized software like Koinly can help streamline the process. Koinly supports multiple cost-basis methods and integrates with major exchanges, making it easier to prepare accurate tax reports.
Why Staying Compliant Matters
India’s new crypto tax policies aim to strike a balance between nurturing innovation and maintaining financial accountability. By staying informed and complying with regulations, traders can avoid penalties while contributing to a stable and transparent crypto ecosystem.
