Introduction
Cryptocurrency has transitioned from a niche investment to a mainstream digital asset class in India. While it is not recognised as legal tender, it is not illegal either. This ambiguous status has often led to confusion among investors and businesses. However, the Indian government has taken significant steps to regulate the crypto ecosystem by introducing a structured taxation framework and compliance obligations.
This guide on “Crypto Taxes” provides a detailed overview of the tax implications, GST considerations, and compliance requirements for crypto transactions in India as of 2025.
Table of Contents
Legal Status of Crypto in India
The regulatory landscape for cryptocurrency in India has evolved since the landmark Internet and Mobile Association of India v. RBI (2020) case, in which the Supreme Court overturned the RBI’s ban on banking services for cryptocurrency transactions.
While India still lacks a formal law classifying crypto as legal tender, the Finance Act, 2022, introduced the term “Virtual Digital Assets” (VDAs) under Section 2(47A) of the Income Tax Act, 1961. This definition includes:
- Cryptocurrencies (e.g., Bitcoin, Ethereum)
- Non-fungible tokens (NFTs)
- Other digital assets notified by the government
This broad classification ensures that emerging digital assets fall under the tax net, even if their legal status under RBI or SEBI remains unclear.
Know more about Upcoming Tax Changes in India 2025: What You Need to Know
Taxation of Cryptocurrency in India
1. Income Tax on Crypto Transactions
Under Section 115BBH, a flat 30% tax applies to all profits from the transfer of VDAs. Key features include:
- No distinction between short-term and long-term gains.
- No deductions allowed except for the cost of acquisition (mining costs, transaction fees, etc., are not deductible).
- Losses cannot be set off against other income or carried forward.
Also read, New Capital Gains Tax Rules 2025: What You Must Know
Example Calculation:
- Purchase Price: ₹1,00,000 (Bitcoin)
- Sale Price: ₹1,50,000
- Profit: ₹50,000
- Tax @ 30%: ₹15,000
- TDS @ 1% (on ₹1,50,000): ₹1,500
- Net Earnings: ₹1,33,500
2. Taxes on Crypto Gifts
If you receive crypto as a gift, it is taxable under “Income from Other Sources” unless obtained from a relative or under an exempt category.
3. Tax Audit Requirements
Frequent traders may be classified as “business income” earners, requiring:
- Maintenance of books of accounts.
- Tax audit under Section 44AB if turnover exceeds ₹10 lakhs.
Also read, Crypto Tax in India: Taxation on Cryptocurrency
GST Implications on Cryptocurrency
1. Crypto Exchange Services
- 18% GST applies to exchange commissions and platform fees.
2. Crypto Mining
If mining is conducted as a business and exceeds the GST threshold, it is subject to a tax rate of 18%.
3. Barter Transactions
Using cryptocurrency to purchase goods or services is treated as a barter transaction, with GST applicable to the fair market value.
4. Import of Crypto Services
- The reverse charge mechanism applies if crypto is used to pay for foreign services (e.g., NFT art, Web3 development).
Compliance and Reporting Obligations
1. Income Tax Return (ITR) Filing
- Crypto gains must be reported in the updated ITR forms under a dedicated VDA schedule.
- Ensure TDS (1%) deducted is reflected in Form 26AS.
2. PMLA Compliance for Exchanges
- Crypto exchanges must follow KYC norms and report suspicious transactions to FIU-IND.
- Mandatory transaction records must be maintained.
3. FEMA Considerations for Cross-Border Transactions
- The RBI has not yet clarified FEMA regulations for international crypto transactions.
- Disclose foreign crypto holdings in Schedule FA of ITR.
Read the effects after the Budget 2025 Crypto Tax Update
Best Practices for Crypto Investors
- Maintain Detailed Records:
- Dates, transaction values, wallet addresses, and token details.
- Use Reputable Exchanges:
- Ensure KYC compliance and TDS adherence.
- Avoid Unregulated P2P Transactions:
- High risk of non-compliance.
- Consult Tax Professionals:
- Given the complexity, expert advice is recommended.
Future of Crypto Regulation in India
- A comprehensive crypto law may be introduced, covering licensing, investor protection, and oversight by the RBI and SEBI.
- The Digital Rupee (CBDC) may coexist with private cryptocurrencies.
Conclusion
While India’s crypto tax regulations are still evolving, the current tax and compliance framework provides investors with a degree of clarity. By adhering to tax laws, maintaining accurate records, and staying informed about regulatory changes, stakeholders can confidently navigate the cryptocurrency landscape.
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Consult a tax professional for personalised guidance.