Crypto gains in 2025? Don’t file ITR without reading these new rules
The Union Budget 2025 introduced Schedule VDA, a new section in the ITR forms exclusively for reporting crypto and NFT-related income.
Crypto Tax Rules for FY 2025–26
Cryptocurrency has become a widely traded asset in India, but tax obligations around it remain complex and evolving. With the government formalising its stance through the Income Tax Act and Budget announcements, taxpayers dealing in crypto assets, officially termed Virtual Digital Assets (VDAs)—must follow specific compliance steps while filing their income tax return for FY 2025–26 (AY 2026–27). Here’s a comprehensive breakdown of the key updates and compliance checklist:
Mandatory Use of Schedule VDA in ITR
The Union Budget 2025 introduced Schedule VDA, a new section in the ITR forms exclusively for reporting crypto and NFT-related income. Every individual or business dealing in VDAs must now report details of their transactions, including date, quantity, sale value, and acquisition cost, within this section. Consolidated reporting may be permitted in some cases, but accurate breakdowns are advised.
Flat 30% Tax Rate on Crypto Gains Continues
Under Section 115BBH of the Income Tax Act, gains from the sale of cryptocurrencies or NFTs continue to attract a flat tax rate of 30 per cent, plus a 4 per cent cess. No deductions other than the acquisition cost are allowed, and losses cannot be set off against any other income or carried forward. This treatment applies regardless of holding period or volume.
1% TDS Still Applicable Above Rs 10,000 Threshold
A 1 per cent Tax Deducted at Source (TDS) remains applicable on crypto transactions exceeding Rs 10,000, under Section 194S. This TDS is generally deducted by the crypto exchange and reflected in Form 26AS, but taxpayers are required to reconcile and report these entries while filing ITR.
Choose the Right ITR Form Based on Crypto Activity
Taxpayers must choose their ITR form based on how they deal with crypto:
- ITR-2 for individuals earning capital gains from long-term or occasional trades.
- ITR-3 for frequent traders, market-makers, or those treating crypto as a business.
- ITR-4 for small businesses or professionals under presumptive taxation.
Failure to use the correct form may lead to rejection of the return or scrutiny.
Foreign Holdings Must Be Disclosed in Schedule FA
Those holding crypto assets on foreign exchanges must fill in Schedule FA (Foreign Assets). Disclosure should include the name of the exchange, country, wallet address, and year-end balances. Non-disclosure of such holdings may result in penalties under the Black Money Act.
Types of Crypto Income and Their Classification
Different types of crypto income must be classified appropriately:
- Capital Gains: Sale of crypto held as an investment.
- Business Income: Frequent trading, mining, or professional activity.
- Other Sources: Airdrops, referral bonuses, staking rewards, or NFT royalties.
Misclassification may lead to compliance issues or additional tax liability.
Maintain Records and File Revised Return if Needed
Investors must maintain comprehensive records of all trades, date, quantity, acquisition price, sale value, exchange used, and wallet ID. These records should be available in case of scrutiny. If crypto income was missed in earlier filings, a revised return can be filed under Section 139(8A) to stay compliant.
Conclusion
With increased data-sharing between exchanges and tax authorities, crypto investors in India must ensure full transparency and accurate reporting. The government’s regulatory push is aimed at creating a more formal structure for the growing crypto market. Proper classification, documentation, and use of Schedule VDA are critical for filing ITR without facing penalties or scrutiny.
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