How to Report Cryptocurrency Gains in Your ITR (India)

With the rise in popularity of cryptocurrencies in India, the tax department has tightened its scrutiny on digital asset transactions. If you're trading or investing in crypto, it's essential to know how to report your cryptocurrency gains in your ITR correctly to avoid penalties, interest, or even notices from the Income Tax Department.

In this comprehensive guide, we’ll explain how to report crypto earnings in India, what tax rules apply, and how you can stay compliant while maximizing returns.

Understanding Crypto Taxation in India

The Indian government officially introduced taxation on virtual digital assets (VDAs), including cryptocurrencies, starting April 1, 2022. According to Section 115BBH of the Income Tax Act:

• A flat 30% tax is levied on income from transfer of cryptocurrencies and other VDAs.

• No deductions (except cost of acquisition) are allowed.

• 1% TDS (Tax Deducted at Source) under Section 194S is applicable on all crypto transactions exceeding ₹10,000 in a financial year.

Who Needs to Report Crypto Gains?

You need to report your crypto gains in your ITR if you:

• Trade in crypto regularly

• Invest long-term or hold digital assets

• Receive crypto as payment for services or products

• Mine cryptocurrencies

• Earn crypto from airdrops, staking, or DeFi rewards

Whether you’re a salaried employee, a freelancer, or a full-time trader, you are liable to pay taxes on any gains from crypto.

Classification of Crypto Income

Before you file your taxes, it's important to identify how your income from cryptocurrency should be classified. It can fall under any of the following:

1. Capital Gains

If you are investing in crypto for the long term (more than 36 months), it may be treated as long-term capital gain. If held for less than 36 months, it will be treated as short-term capital gain. However, under Section 115BBH, all crypto gains are taxed at 30%, irrespective of holding period.

2. Business Income

If you are actively trading or treating crypto as your primary source of income (frequent buying/selling), the income may be treated as business income.

3. Income from Other Sources

If you're earning crypto through mining, staking, or as a reward from promotions, it is taxed under income from other sources at your applicable slab rate.

How to Calculate Your Crypto Gains

Here's a simplified example to understand how to calculate your crypto gains:

Example:

• You buy 1 ETH at ₹1,50,000

• You sell it later at ₹2,00,000

• Your gain = ₹50,000

Tax on this gain would be:

• 30% of ₹50,000 = ₹15,000

• Additionally, 4% cess = ₹600

• Total Tax = ₹15,600

Note: No deduction is allowed for transaction fees, internet bills, or infrastructure costs.

Step-by-Step Guide to Report Crypto Gains in ITR

Step 1: Collect All Transaction Details

Maintain detailed records of:

• Date of acquisition and sale

• Type of cryptocurrency

• Value at the time of transaction

• Exchange used

• Transaction ID and wallet address

Step 2: Choose the Correct ITR Form

Depending on your income source, you should choose the appropriate ITR form:

Most crypto investors and traders will file either ITR-2 or ITR-3.

Step 3: Report Under the Right Head

• Go to the Schedule VDA section in your ITR form.

• Report each crypto asset sold.

• Mention the cost of acquisition and the sale price.

• The system will automatically calculate the gain and tax liability.

Step 4: Pay Advance Tax (If Applicable)

If your crypto income exceeds ₹10,000 during the financial year, you're liable to pay advance tax in four instalments. Delays will attract interest under Sections 234B and 234C.

Step 5: Pay TDS (If Deducted)

• Exchanges are now deducting 1% TDS on sell transactions.

• You can check Form 26AS or AIS (Annual Information Statement) to see the TDS deducted.

• Claim this TDS while filing ITR.

Common Mistakes to Avoid

1. Ignoring Crypto Income
   Even if you trade small amounts, you must report it if taxable.

2. Using Wrong ITR Form
   Filing ITR-1 despite crypto gains is a common mistake. Use ITR-2 or ITR-3 instead.

3. Not Reporting Airdrops or Mining Income
   These are taxable under “Income from Other Sources”.

4. Improper Record-Keeping
   Always keep screenshots, wallet IDs, exchange emails, and transaction logs.

5. Mismatched PAN on Exchange and ITR
   Ensure the same PAN is used in exchange accounts and your ITR.

Tools to Simplify Crypto Tax Filing

With the number of transactions and volatile pricing, manually calculating taxes can be overwhelming. There are now AI-powered platforms that track your crypto activity across multiple wallets and exchanges. These tools help in:

• Real-time portfolio tracking

• Tax-ready reports

• TDS management

• Importing data from top exchanges

Platforms like Fidato Paycore use advanced AI to monitor blockchain data 24/7 and manage your crypto investments to optimize gains while ensuring compliance with Indian tax regulations.

What if You Don't Report Crypto Income?

The Income Tax Department is actively tracking crypto transactions through AIS (Annual Information Statement), PAN details on exchanges, and TDS records.

If you fail to report:

• Penalty under Section 270A (50% of tax payable)

• Prosecution under Section 276C

• Interest under Sections 234A, 234B, and 234C

So, it’s always better to disclose and pay the required tax.

Final Thoughts

Cryptocurrency taxation is now a reality in India, and every investor or trader must understand their tax obligations. Whether you’re a long-term HODLer or an active day trader, accurate reporting of your gains in your ITR is crucial.

With the 30% flat tax and 1% TDS in place, it's no longer optional to report crypto earnings. The smart move is to track, report, and pay on time to avoid future complications.

As crypto grows in adoption and regulation tightens, smart platforms like fidatopaycore.it can help you manage your investments efficiently while staying compliant.

FAQs

Q1. Can I deduct losses from crypto?
No. Losses from the transfer of crypto cannot be set off against any income, nor carried forward.

Q2. Do I need to pay tax if I gift crypto to someone?
The receiver may have to pay tax if the gift exceeds ₹50,000, depending on the relationship and context.

Q3. What happens if I earn in crypto but don’t convert to INR?
Even unrealized gains may not be taxed, but once sold or exchanged, they become taxable.

If you'd like to simplify your crypto investment tracking and tax filing process, start maintaining clean records and consider using AI-powered platforms to automate it smartly.