How to Report Crypto Income in India: Complete 2024 Tax Guide

Understanding Crypto Taxation in India

Since the 2022 Union Budget, cryptocurrency transactions are explicitly taxable under Indian law. The Finance Act classifies virtual digital assets (VDAs) like Bitcoin and Ethereum as taxable assets, with specific rules for reporting income. All Indian residents earning crypto income must declare it in their Income Tax Returns (ITR), regardless of whether transactions occurred on Indian or international exchanges. Non-compliance can result in penalties up to 100% of the tax due plus interest.

Types of Crypto Income You Must Report

1. Trading Profits: Gains from buying/selling cryptocurrencies on exchanges
2. Staking Rewards: Income from validating blockchain transactions
3. Mining Income: Value of coins earned through mining operations
4. Airdrops & Forks: Free tokens received through promotions or chain splits
5. Crypto Payments: Income from goods/services paid in cryptocurrency
6. DeFi Earnings: Yield farming, liquidity mining, and lending rewards

Step-by-Step Guide to Reporting Crypto Income

1. Calculate Your Taxable Income

For each transaction:

• Convert crypto values to INR using exchange rates on transaction dates
• Calculate capital gains: (Selling Price – Cost Price) – Transaction Fees
• Apply 30% flat tax on net gains + 4% health/education cess

2. Maintain Required Records

• Dated transaction history from all exchanges
• Wallet addresses and transaction IDs
• Proof of cost acquisition (purchase receipts)
• Screenshots of exchange rates on transaction dates

3. File Through Correct ITR Form

Use:

• ITR-2: For capital gains from occasional trading
• ITR-3: For professional traders/business income
• ITR-4: For presumptive taxation (if applicable)

4. Pay TDS Compliance

Deduct 1% TDS on transactions exceeding:

• ₹10,000 per transaction
• ₹50,000 total per financial year

Key Tax Rules to Remember

• ⚖️ 30% Flat Tax: Applies to all crypto gains regardless of holding period
• ❌ No Loss Offset: Crypto losses can’t offset other income
• 📆 FY Reporting: Income must be reported in the financial year it’s realized
• 🌐 Global Income: Includes crypto held on foreign exchanges

FAQs: Reporting Crypto Income in India

1. How are crypto gifts taxed?

Gifts exceeding ₹50,000 annually are taxable at recipient’s income tax slab rate. Document giftor’s PAN for amounts over ₹10 lakhs.

2. Do I pay tax on unrealized gains?

No. Tax applies only when you sell, trade, or spend cryptocurrency (realized gains).

3. How to value airdropped tokens?

Use fair market value on the day of receipt. Track exchange listings for accurate pricing.

4. Can I deduct crypto trading fees?

Yes. Transaction fees (gas fees, exchange commissions) reduce taxable gains when calculating net profit.

5. Is P2P trading taxable?

Yes. All peer-to-peer transactions must be reported with bank/UPI records as proof.

6. What if I traded on foreign exchanges?

You must convert all transactions to INR using RBI reference rates for the transaction date and report in ITR.

7. Are NFTs taxable?

Yes. NFTs fall under VDA classification with identical 30% tax on profits.

Avoiding Common Reporting Mistakes

1. Missing Small Transactions: Even ₹100 trades require reporting
2. Incorrect Cost Basis: Include all acquisition costs (transfer fees, gas)
3. Ignoring TDS: Buyers must deduct 1% TDS above threshold limits
4. Using Wrong ITR Form: Frequent traders must file ITR-3, not ITR-2

Pro Tip: Use crypto tax software like Koinly or CoinTracker that auto-generates India-compliant tax reports using RBI exchange rates.

Always consult a chartered accountant specializing in crypto taxation before filing. Tax laws may evolve – check the Income Tax Department’s latest circulars for updates.