How to Report Crypto Income in India: Your 2024 Tax Compliance Guide

Introduction: Navigating Crypto Taxes in India

With over 115 million crypto users in India, understanding how to report cryptocurrency income has become crucial. Since the 2022 Union Budget introduced specific tax rules, failure to comply can lead to severe penalties. This guide breaks down India’s crypto tax framework into actionable steps, helping you accurately declare earnings from trading, mining, staking, and other crypto activities while avoiding legal pitfalls.

Legal Status of Cryptocurrency in India

While cryptocurrencies like Bitcoin aren’t legal tender, they’re not illegal to trade. The Reserve Bank of India (RBI) prohibits banks from facilitating crypto transactions, but individuals can legally hold and trade digital assets. Key regulatory milestones include:

• 2022 Budget: Imposed 30% tax on crypto gains + 1% TDS
• 2023: Crypto included under PMLA, mandating KYC for exchanges
• No capital gains classification: All crypto profits taxed flat at 30% regardless of holding period

How Crypto Income is Taxed: Key Rules

India’s crypto tax regime operates under two primary mechanisms:

1. 30% Flat Tax: Applies to all profits from crypto transfers (selling, trading, swapping). No deductions allowed except original acquisition cost.
2. 1% TDS (Section 194S): Deducted at source for transactions exceeding ₹50,000/day or ₹10,000/transaction. Applies to exchanges and peer-to-peer deals.

Additional Levies: Surcharge (up to 37% for high-income earners) + 4% health and education cess apply to the 30% tax.

Taxable Crypto Activities: What You Must Report

These common crypto transactions trigger tax obligations:

• Trading: Profits from buying/selling on exchanges
• Staking Rewards: Treated as income at fair market value when received
• Airdrops & Hard Forks: Taxable as “Income from Other Sources”
• Crypto Mining: Rewards taxed as business income or capital gains
• NFT Sales: Profits subject to 30% tax + TDS

Step-by-Step Guide to Reporting Crypto Income

Step 1: Maintain Records
Keep detailed logs of every transaction including:
– Date and time
– Token type and quantity
– INR value at transaction
– Wallet/exchange details
– Purpose (investment/business)

Step 2: Calculate Taxable Income
For each disposal:
Taxable Gain = Selling Price – (Acquisition Cost + Transfer Fees)
Example: Bought 1 ETH at ₹2,00,000, sold at ₹2,50,000. Taxable gain = ₹50,000.

Step 3: File ITR Form
Use:
– ITR-2: For individuals with capital gains (if crypto is investment)
– ITR-3: If trading as business income
Report gains under “Capital Gains” or “Profits from Business” schedules.

Step 4: Pay TDS Credits
Claim TDS deducted by exchanges (visible in Form 26AS) against final tax liability.

Penalties for Non-Compliance

Failure to report crypto income invites:
– Section 271AAC: 50% penalty on underreported income
– Section 234F: ₹5,000 late filing fee (₹10,000 if post-Dec 31)
– Prosecution: Up to 7 years imprisonment for tax evasion over ₹25 lakh

Recent Updates and Compliance Tips

Key 2023-24 developments:
– Mandatory disclosure of foreign crypto holdings under Schedule AL
– CBDT clarification: Crypto losses can’t offset other income
– Exchanges now issue Form 16A for TDS

Pro Tip: Use crypto tax software like Koinly or CoinTracker that auto-generates India-compliant tax reports.

FAQ: Crypto Tax in India

Q1: Do I pay tax if I transfer crypto between my wallets?
A: No tax applies for transfers between self-owned wallets. TDS may deduct if using an exchange.

Q2: How are crypto gifts taxed?
A: Gifts exceeding ₹50,000/year are taxable for recipients. Givers may face clubbing provisions.

Q3: Can I carry forward crypto losses?
A: Losses can only be offset against future crypto gains (up to 8 years), not salary or other income.

Q4: Is TDS refundable?
A: Yes, if your total tax liability is lower than TDS deducted, claim refunds via ITR filing.

Q5: What if I traded on foreign exchanges?
A: You must still report income and pay 30% tax. Failure violates Black Money Act.

Conclusion: With India tightening crypto taxation, meticulous reporting is non-negotiable. Start organizing transaction history now and consult a chartered accountant for complex cases. Staying compliant avoids penalties while legitimizing your crypto journey.