India’s Crypto Tax Framework: What You Need to Know
India introduced formal cryptocurrency taxation rules in the 2022 Union Budget, bringing digital assets under the tax net. Key provisions include:
- 30% tax on crypto gains (including NFTs)
- 1% TDS on all crypto transactions above ₹10,000
- No deduction for expenses (except acquisition cost)
- No offsetting crypto losses against other income
How to Calculate Crypto Taxes in India
Follow these steps to compute your tax liability:
- Classify transactions as:
– Investment (held >36 months = long-term)
– Business income (frequent trading) - Calculate gains using:
Sale Price – (Cost + Improvement Costs) - Apply 30% flat tax + 4% cess on profits
- Include 1% TDS in advance tax payments
5-Step Compliance Checklist for Crypto Investors
- Maintain detailed records of:
– Purchase/sale dates
– Transaction values
– Exchange fees
– Wallet addresses - Reconcile data across all exchanges used
- File advance tax if liability exceeds ₹10,000
- Report crypto income under ‘Other Sources’ in ITR
- Preserve documents for 6 years
Key Challenges in Crypto Tax Compliance
- Tracking airdrops/staking rewards valuation
- Calculating cost basis for mined crypto
- Handling cross-exchange transactions
- Managing TDS compliance for P2P trades
- Interpreting evolving regulatory guidelines
India Crypto Tax FAQ
Q1: Is crypto legal in India?
A: While taxed, cryptocurrencies remain unregulated – RBI maintains caution but transactions are legal.
Q2: How is TDS applied on crypto trades?
A: 1% deducted on:
– Exchange trades above ₹10,000/day
– P2P transactions exceeding ₹50,000/transaction
Q3: Can I deduct exchange fees?
A: No – Section 115BBH prohibits all deductions except original purchase cost.
Q4: What about crypto gifts?
A: Gifts above ₹50,000 taxable as income for receiver under Section 56(2)(x).
Q5: Penalties for non-compliance?
A: Up to:
– 100% tax evaded amount
– ₹10,000/month for TDS default
– 1 year imprisonment for willful evasion
