Crypto is no longer a grey area for the Indian Income Tax Department. If you bought, sold, swapped, received, or earned any cryptocurrency in FY 2025-26, you must declare it in your ITR under Schedule VDA (Virtual Digital Assets). The IT Department has already issued over 44,000 notices for undisclosed VDA income. This guide tells you exactly what to do.
The Three Core Rules of Crypto Taxation in India
| Rule | Detail |
|---|---|
| Tax Rate | Flat 30% on income from transfer of VDAs under Section 115BBH + 4% cess (minimum effective rate: 31.2%) |
| TDS | 1% Tax Deducted at Source under Section 194S on every qualifying VDA transfer |
| Reporting | Mandatory Schedule VDA in ITR - per-transaction details required |
| Loss Set-Off | NOT allowed - crypto losses cannot offset other income or other crypto gains |
| Carry Forward | NOT allowed - crypto losses cannot be carried to future years |
| Deductions | ONLY cost of acquisition - fees and gas charges are NOT deductible |
What Counts as a Virtual Digital Asset (VDA)?
Under the Finance Act 2025 (effective 1 April 2026), the VDA definition now explicitly includes crypto-assets. VDAs include:
- All cryptocurrencies - Bitcoin, Ethereum, Solana, XRP, meme coins, stablecoins
- Exchange tokens and DeFi tokens
- NFTs (Non-Fungible Tokens)
- Crypto received from staking, airdrops, and mining
- Any digital asset notified by the Central Government
Which Transactions Are Taxable?
| Transaction | Tax Treatment |
|---|---|
| Selling crypto for INR | 30% on profit (sale price minus cost of acquisition) |
| Crypto-to-crypto swap (BTC to ETH) | 30% - each swap is a taxable transfer |
| Using crypto to buy goods/services | 30% on profit at time of spending |
| Staking rewards received | Taxed at slab rates as Other Sources when received; then 30% when sold |
| Airdrops received | Taxed at slab rates on fair market value when received; then 30% when sold |
| Holding crypto (not selling) | Not taxable until transferred or sold |
Which ITR Form for Crypto?
- ITR-2 - for investors treating crypto as capital gains (casual, less frequent trading)
- ITR-3 - for high-frequency traders or those treating crypto as business income
Important: ITR-1 and ITR-4 cannot be used if you have any VDA income. Filing in the wrong form results in a defective return notice.
Step-by-Step: How to Fill Schedule VDA
- Download transaction history from every exchange used in FY 2025-26 - CoinDCX, WazirX, CoinSwitch, Binance, KuCoin, and any others
- Log in at incometax.gov.in and start filing ITR-2 or ITR-3
- Indicate that you have VDA income - this activates Schedule VDA in the form
- For each transaction group enter: Type of VDA, Date of acquisition, Date of transfer, Cost of acquisition in INR, Sale consideration in INR, resulting income
- Cross-check TDS deducted by exchanges in Form 26AS and AIS - match with Schedule VDA entries
- Note: Section 87A rebate does NOT apply to VDA income - even if total income is below Rs 7 lakh
- Claim TDS credit to reduce final 30% tax liability
- Pay balance tax as Self-Assessment Tax before filing
Foreign Crypto Holdings - Additional Disclosure
Indian residents holding crypto on foreign exchanges (Binance Global, Coinbase, Kraken) must disclose these in Schedule FA (Foreign Assets) if total value exceeds Rs 20 lakh. Failure can attract penalties under the Black Money Act - far more severe than regular income tax penalties.
Budget 2026: Tighter Enforcement
Budget 2026 introduced stricter penalties for crypto reporting entities under Sections 446 and 509(1) of the IT Act 2025 - Rs 200 per day for non-reporting and Rs 50,000 for inaccurate reporting. Exchanges are mandated to report every transaction. If your AIS shows VDA transactions but your ITR has no Schedule VDA, expect a notice.
Common Crypto Tax Mistakes
- Claiming concessional 12.5% LTCG rate on crypto - wrong; it is always 30% regardless of holding period
- Trying to set off a Bitcoin loss against Ethereum gains - not allowed
- Not reporting staking or airdrop income at market value on receipt date
- Filing ITR-1 or ITR-4 with crypto income - results in defective return
- Not disclosing crypto on foreign exchanges in Schedule FA
Crypto ITR Filing - Get It Right with Regikart
Crypto ITR is technically the most demanding individual ITR filing - per-transaction Schedule VDA, TDS reconciliation, Section 87A exclusion, and potential Schedule FA for foreign holdings. Regikart's CA team handles multi-exchange consolidation and accurate Schedule VDA filing.
| Ready to File Your ITR for FY 2025-26? Let Regikart's expert CA team handle it - accurately, on time, and stress-free. File Your ITR with Regikart: https://regikart.com/income-tax-return-filing Call / WhatsApp: +91 945 945 6700 | Email: [email protected] |
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Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws may change. Please consult a qualified Chartered Accountant for advice specific to your situation.
About the author
Deepak
Senior Advisor at Regikart. Want to discuss this in the context of your business?
