Crypto Gain, Without Pain: Navigating India's 30% Tax Rule This Filing Season

Crypto Tax: As tax season dawns upon us once again, many Indian crypto investors find themselves in familiar terrain. This is the time when tax-payers anxiously scroll through spreadsheets and try to reconcile trades, calculate gains, and decode what the Income Tax Department expects from them. The heady thrill of trading in crypto, once cloaked in digital anonymity, has now come to a point where it meets the hard ledger of the Indian tax law. But clarity is the first step towards compliance. And, in this emerging age of regulated digital assets, every investor must trade not only with foresight but also with fiscal responsibility.

Let us demystify crypto taxation in India, its origins, obligations, and the very real consequences of omission.

The Taxman Arrives 

In 2022, India made history by becoming one of the first major economies to formally tax Virtual Digital Assets (VDAs). The Finance Act 2022 inserted Section 115BBH into the Income Tax Act, and it encapsulated the government’s intent: trade as you wish, but pay your dues. Since then, every crypto trade, NFT sale, and token swap has carried with it a legal implication.

Here is the fundamental taxation rule: All gains from VDAs are taxed at a flat 30%. This is regardless of your income slab. Whether you made Rs 10,000 or Rs 10 lakh in profit, the government gets nearly a third. This is before you consider 1% TDS (Tax Deducted at Source) on every trade above Rs 10,000, as per Section 194S.

The Anatomy of a Crypto Tax Obligation

To file your taxes correctly, you need to understand what is taxable and what is not. Here is a quick list of what is taxed in crypto: 

  • Selling crypto for INR (realised gains)
  • Swapping one crypto for another (e.g., ETH to BTC)
  • Using crypto to buy goods or services
  • Airdrops and staking rewards (if monetised)
  • NFT sales

Each of these events creates a taxable scenario and it should be recorded with date, token, value in INR at the time, and the gain or loss incurred.

What Is Not Deductible?

Here is where the law tilts heavily against the investor. Under Section 115BBH, no deductions are allowed for mining costs, blockchain gas fees, or even exchange platform fees. Investors also should note that losses from one crypto cannot be offset against gains from another.

So, if you lose INR 10,000 in one trade but gain Rs 50,000 in another, you will have to pay the entire 30% tax on the latter gain. Under the current tax laws, there is no option to carry forward the losses to the next year. Essentially, it is a binary world, and every trade is a closed-loop transaction in the eyes of the taxman.

TDS: The Invisible Thread

Introduced under Section 194S, the 1% TDS is more than a deduction. It is more of a records mechanism. Every time you sell crypto over Rs 10,000 in value, 1% is deducted by the exchange and remitted to the government. All good crypto exchanges automatically handle this deduction and issue Form 16A to enable customers to claim the amount while filing returns.

However, the responsibility is on the customer to reconcile these deductions with their PAN and ensure these reflect in Form 26AS. So, crypto customers must maintain a clean, trackable transaction record for easier tax filing.

A Practical Guide for This Filing Season

The July 31 deadline for ITR filing has been extended to September 15 this time for individual taxpayers. Here are five clear action points to navigate crypto taxes with confidence:

  • Download your trade reports from all exchanges you have used (Giottus, Binance, etc).
  • Segregate taxable events like sales, swaps, NFT dealings, and staking rewards.
  • Calculate gains/losses on each transaction.
  • Include all income from crypto in Schedule VDA in your ITR form (typically ITR-2 or ITR-3).
  • Cross-check TDS credits in Form 26AS and AIS. Ensure PAN linkage for all platforms.

And if you have made no trades but received airdrops or gifts? Declare them under ‘Income from Other Sources’ if converted to fiat.

Beyond Compliance: Building Trust

At Giottus, we believe that compliance is not a cost; it is capital that earns you trust from institutions, eligibility for credit, and ultimately peace of mind.

All exchanges will provide customers with detailed TDS certificates, downloadable tax reports, and portfolio summaries to make their filing journey smoother. 

The Future of Crypto Taxation in India

The current regime is nascent and perhaps harsh. But it signals legitimacy. In the future, crypto players expect to see a rationalised tax slab. In this manner, there will be more customers who are drawn into the ecosystem. If there are more people, the government can draw from a larger tax pool. Then, customers should be allowed to offset losses. This will be a more logical thing to do, as the aggregate of what one gains will be taxed.  

All crypto stakeholders are also expecting more regulatory clarity and clear guidelines in due course. Until then, let the principle be clear: Every wallet leaves a footprint, and every footprint should match your filing. Stay safe, file your taxes. 

(The author is the CEO of Giottus Crypto Platform)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd.

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