Cryptocurrencies like Bitcoin, Ethereum, and others have rapidly moved from niche, tech-centric circles into the mainstream. Investors, traders, tech enthusiasts, and even businesses across India are exploring blockchain-based assets for wealth creation, payments, or operational solutions. But with growth comes regulation.
From April 1, 2022, the Indian government implemented a comprehensive crypto tax framework aimed at formalizing this space, curbing tax evasion, and generating revenue. If you’ve ever traded, mined, staked, or received tokens via airdrops, this framework applies to you.
Filing taxes on digital assets is now mandatory, and accuracy matters. In this guide, we’ll help you get a gist of cryptocurrency taxation in India. Let’s get started.
Why Is Crypto Taxed in India?
1. Unlocking a New Revenue Stream
Crypto volumes have surged in recent years and taxing them opens up a significant revenue opportunity for the government. With limited means to monitor decentralized activity, the new tax rules ensure transparency and accountability in crypto dealings.
2. Closing the Reporting Gap
Historically, many crypto holders sold or transferred assets abroad without reporting for tax purposes. Mandatory TDS, record-keeping obligations, and a flat tax rate help close this information gap.
3. Bringing Parity with Traditional Assets
Crypto is now treated like a capital asset. Just as your real estate gains or stock profits are taxed, crypto gains fall under similar rules (albeit with higher rates). This fosters parity between digital and traditional financial markets.
4. Curbing Speculation
At a 30% flat rate plus cess and surcharge, the tax structure is designed to discourage short-term flipping for speculative gains. It nudges investors toward long-term thinking or digital-asset-based ecosystem participation rather than high-frequency trades.
Types of Crypto Taxes You Should Know
India’s crypto tax system introduces distinct tax categories depending on your crypto activity.
Capital Gains on Crypto
What it covers
Any disposal, meaning sale, swap, transfer, or exchange—any action that results in a monetary or asset gain. Even gifting crypto with INR value is a disposal.
Tax rate
Flat 30% on gains, irrespective of how long you held the asset. No lower slab for holding periods.
What you can deduct
Only acquisition cost and transaction charges—no indexation, no deductions for holding costs, etc.
Example
You buy crypto worth ₹50,000 and sell it for ₹1 lakh. Your taxable gain = ₹50,000 × 30% = ₹15,000 (plus 4% cess/surcharge).
Why it matters
This uniform rate simplifies calculations but can be heavy if you’re a frequent trader. It reinforces record-keeping and awareness of disposal events, not just purchases.
1% TDS on Crypto Transactions
How it works
Starting July 1, 2022, every crypto transaction—except purchasing crypto—triggers a 1% TDS at the payment stage (threshold ₹10,000 per month). It’s deducted by the buyer and remitted to the government.
| Transaction Type | When TDS Applies |
| Sell | On sale value |
| Transfer | On transfer value |
| Swap/Pay | On transaction value |
Your responsibility
TDS doesn’t reduce your final tax liability—it’s like an advance payment. You must report gross gains and adjust TDS in Form 26AS. Any unpaid balance is due during ITR submission.
Business impact
Frequent traders or businesses may face cash flow pressure if they receive income only after the buyer claims TDS. You might need to settle more during ITR filing time.
Tax on Airdrops, Staking, and Mining
These activities generate tokens beyond traditional markets and raise unique tax considerations:
Airdrops & Fair Launch Events
These are tokens you receive for free. Taxable when received, at fair market value. They’re treated as income under “Income from Other Sources.”
Staking/Yield Rewards (DeFi/GameFi)
Rewards or tokens earned through staking go into your wallet. Taxable at receipt, valued at its INR market price.
Mining (Proof-of-Work)
Tokens mined are treated as business income, not capital gains, because you’ve supplied resources (computing, energy) in return for tokens.
- Expenses allowed: electricity, hardware cost, depreciation, and repair bills.
- Report income under “Profits & Gains from Business or Profession.”
- Maintain thorough records and relevant bills.
Why it matters
Ignoring airdrops, staking, or mining can invite scrutiny and penalties. You must anticipate taxable income even if you didn’t sell the coins.
How to Calculate Your Crypto Taxes
Step 1: Record every transaction
Maintain a running register of date, type, quantity, INR value, and transaction fee for every trade, reward, or gift—manually or via crypto-tax apps.
Step 2: Identify disposals and events
Mark every sale, swap, transfer, airdrop, staking reward, and mined coin as a taxable event.
Step 3: Calculate capital gains
- Sale proceeds minus (buy cost + fees).
- 30% flat rate → tax = 30% × gain.
- Add 4% cess/surcharge.
Step 4: Calculate business income
- Mining income = INR value * tokens received.
- Deduct expenses.
- Apply slab tax rate.
Step 5: Add other income
- Include airdrops/staking as “other sources” (no deduction allowed).
- 30% tax → no deduction.
Step 6: Adjust TDS paid
Check Form 26AS. Deduct TDS already paid from your total liability.
Step 7: Self-Assessment Tax
Pay outstanding tax (if TDS insufficient) before ITR submission date.
Step 8: File Accurate ITR
Use ITR-2 (capital gains, no business) or ITR-3/ITR-4 (if mining/trading is business).
Example of Crypto Gain Calculation
Let’s calculate crypto taxes for a serious trader:
- Jan 2023: Bought 0.8 ETH for ₹1,60,000 (brokerage ₹2,000)
- Jun 2023: Swapped 0.4 ETH for 15,000 USDT → INR value ₹7,20,000
- Dec 2023: Sold the rest for ₹6,00,000 (brokerage ₹3,000)
Gain on swap
Proceeds = ₹7,20,000; Cost = ₹80,000 (0.4 × ₹2L); Fees = ₹1,000 → Gain = ₹5,39,000
Tax = 30% × 5,39,000 = ₹1,61,700 (+4% cess ≈ ₹6,468) = ₹1,68,168
Gain on sale
Proceeds = ₹6,00,000; Cost = ₹80,000; Fees = ₹3,000 → Gain = ₹5,17,000
Tax = 30% × 5,17,000 = ₹1,55,100 + ₹6,204 = ₹1,61,304
Total tax = ₹3,29,472
Reporting & Filing Crypto Taxes
1. Maintain comprehensive records
Exchange CSVs, blockchain explorer screenshots for wallet transactions, and royalty mining logs—document for at least 8 years.
2. Choose the correct ITR form
- ITR-2: For capital gains and non-business crypto income.
- ITR-3/4: If mining/trading is business.
3. Report gains & income
- Schedule CG for capital gains (crypto).
- Schedule OS for mining/airdrops/staking.
- Schedule IT for business income (mining).
- Schedule TDS to reconcile deducted TDS.
4. Pay dues before filing
Calculate taxes and self-assessment before ITR. Use challans 280.
5. Submit and verify
File via portal, verify with OTP or Aadhaar, and download ITR-V for records.
Penalties for Non-Compliance
| Non-compliance | Penalty/Consequence |
| Late filing | ₹1,000–₹5,000 (234F) |
| Late tax payment | 1% interest per month (234A) |
| Undisclosed income | Penalty up to 100% of tax + prosecution |
| Not deducting TDS | Penalty equal to TDS amount, interest & prosecution |
| Incorrect disclosure | Returns can be reassessed within 6 years under 147 or 148 |
Summary of Crypto Transactions and Applicable Rates
| Crypto Activity | Tax Treatment | Applicable Tax Rate |
| Capital gain (sale/swap) | Profit = disposal value – cost | 30% flat + 4% cess |
| Airdrops / Staking income | Treated as income under “other sources” | 30% flat rate + 4% cess |
| Mining rewards | Treated as business income; expenses deductible | Slab rate + cess/surcharge |
| TDS (on payments) | Advance tax deduction | 1% |
| Crypto loss | Not adjustable, except if declared as business loss | N/A |
Conclusion
India’s new crypto tax framework is a clear signal: cryptocurrencies are here to stay. The rules are strict but transparent and manageable if you plan properly. Keep detailed transaction records, understand the specific tax on each crypto event, and declare comprehensively in your ITR. With clarity, compliance, and organization, you can confidently enjoy crypto’s potential—without tripping over tax pitfalls.
FAQs
Are crypto-to-crypto trades taxable?
Yes. Every swap from one token to another is a taxable event, and gain must be calculated.
Can I offset crypto losses?
No, crypto losses cannot be set off against other income nor carried forward—unless treated as business losses.
How is mining income taxed?
It’s treated as business income. You can deduct mining-related expenses and pay tax as per your slab rate.
What about staking or DeFi earnings?
Staking income is taxable as “other sources” at 30%—deduction for related costs is not allowed.
What if I don’t pay crypto tax?
Expect late fees, interest, penalties, reassessment, or prosecution, depending on severity.
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