Is Cryptocurrency a ‘Currency’ or an ‘Asset’ in India?
In India, cryptocurrencies and NFTs are classified as “Virtual Digital Assets” (VDAs) under Section 2(47A) of the Income Tax Act. This definition includes:
- Cryptocurrencies (Bitcoin, Ethereum, etc.)
- NFTs (Non-Fungible Tokens)
- Other digital tokens generated through cryptographic means
Exclusions: Fiat currencies (INR, USD, etc.), gift cards, and vouchers are not considered VDAs.
How is Cryptocurrency Taxed in India?
| Tax Aspect | Details |
|---|---|
| Tax Rate on Crypto Gains | 30% + 4% cess |
| TDS on Crypto Transactions | 1% (if transaction exceeds ₹50,000/₹10,000) |
| Set-off of Losses | Not allowed (even against other crypto losses) |
| Tax on Crypto Gifts | Taxable if received from non-relatives (above ₹50,000) |
| Tax on Mining & Staking | 30% on rewards (treated as income) |
| Tax on Airdrops | 30% on fair market value at receipt |
Key Points:
- No distinction between short-term & long-term gains (flat 30%).
- No deductions allowed except the cost of acquisition.
- 1% TDS applies on sales (Indian exchanges deduct automatically).
Which Crypto Transactions Are Taxable?
| Transaction Type | Taxable? | Tax Rate |
|---|---|---|
| Buying goods/services with crypto | Yes | 30% on gains |
| Crypto-to-crypto swaps | Yes | 30% on gains |
| Trading crypto for INR | Yes | 30% on gains |
| Receiving crypto as salary | Yes | Normal slab rates |
| Mining rewards | Yes | 30% on receipt & sale |
| Staking rewards | Yes | 30% on receipt & sale |
| Airdrops | Yes | 30% on FMV at receipt |
| Gifts (from non-relatives) | Yes (if > ₹50,000) | Normal slab rates |
How to Calculate Crypto Tax?
Formula:
Taxable Gain = Selling Price – Purchase Price
Example:
- Bought Bitcoin for ₹5,00,000 → Sold for ₹7,00,000
- Gain = ₹2,00,000
- Tax = 30% of ₹2,00,000 = ₹60,000
Note:
- Losses cannot be adjusted against other income.
- TDS (1%) is deducted at the time of sale (if applicable).
TDS on Crypto Transactions (Section 194S)
| Transaction Type | Who Deducts TDS? | Rate | Example |
|---|---|---|---|
| Buying with INR (Indian Exchange) | Exchange | 1% | CoinDCX, WazirX |
| P2P or Direct Purchase | Buyer | 1% | Buying from a friend |
| Foreign Exchange Trade | Buyer (Manual) | 1% | Binance, KuCoin |
| Crypto-to-Crypto Swap | Both parties | 1% each | ETH for USDT |
Exemption: No TDS if dealing with non-residents (e.g., international exchanges/DEX).
Special Cases: Airdrops, Mining & Staking
1. Airdrops
- Taxed at 30% on fair market value at receipt.
- If sold later, additional 30% on profits.
2. Mining Income
- Rewards taxed at 30% (treated as income).
- No deductions for electricity/hardware costs.
3. Staking Rewards
- Taxed at 30% when received.
- No tax on transferring to staking pools.
Crypto Losses & Reporting in ITR
- Losses cannot be set off against other income.
- Must report under Schedule VDA in ITR.
Timeline of Crypto Tax Regulations in India
| Year | Key Event |
|---|---|
| 2013 | RBI warned against crypto risks |
| 2018 | RBI banned banks from servicing crypto exchanges |
| 2020 | Supreme Court lifted RBI ban |
| 2022 | 30% tax + 1% TDS introduced in Budget |
Final Thoughts
Crypto taxation in India is strict, with no exemptions for losses. Proper bookkeeping is essential to track transactions. Use crypto tax tools (like ClearTax) to simplify calculations.
Need help filing crypto taxes? Try automated solutions to ensure compliance!
