Overview of India’s Crypto Tax Regulations for 2025
For the financial year 2024-2025, India classifies cryptocurrencies and related digital tokens as virtual digital assets (VDAs) under the revamped Income Tax Act, 2025, which replaced the 1961 Act on August 22, 2025. VDAs encompass cryptocurrencies like Bitcoin and Ether, non-fungible tokens (NFTs), and other cryptographically secured digital assets, excluding fiat currencies such as the Indian rupee.
While legal to buy, sell, and hold, VDAs are not recognized as valid payment methods, placing crypto in a legally ambiguous status. Regulatory oversight is shared among multiple agencies: the Income Tax Department enforces tax rules under the Central Board of Direct Taxes (CBDT), the Financial Intelligence Unit (FIU-IND) monitors anti-money laundering compliance, and the Reserve Bank of India (RBI) alongside the Securities and Exchange Board of India (SEBI) shape broader regulatory policies.
Taxable Events and Rates
India imposes a flat 30% tax on gains from VDA transfers, regardless of holding period, under Section 115BBH. This applies uniformly to both short-term and long-term capital gains, with no deductions allowed beyond the cost of acquisition. Losses from one VDA cannot be offset against gains from another or carried forward.
A 1% tax deducted at source (TDS) under Section 194S applies to all VDA transfers exceeding thresholds—generally 50,000 rupees per financial year for specified persons, and 10,000 rupees for others—to improve transparency and tax compliance. This TDS applies even to transfers paid with other VDAs, requiring the buyer to remit the tax in cash to the government.
Key taxable events include:
- Trading cryptocurrencies for other cryptos or fiat currencies
- Receiving staking rewards, airdrops, or tokens from hard forks
- Income from mining activities
- Payments made in cryptocurrencies considered business or professional income
Non-taxable actions include holding VDAs without transfer or transferring assets between personal wallets, as these do not generate taxable income or gains.
Calculating and Reporting Crypto Taxes
Taxpayers must calculate gains using a cost basis that includes purchase price plus transaction fees. Accepted accounting methods include FIFO, LIFO, or specific identification, but consistency is required. Crypto-to-crypto trades are treated as simultaneous sale and purchase transactions, with valuations based on fair market prices in rupees at the time of transfer.
Reporting crypto income is mandatory, with a new Schedule VDA introduced for financial year 2025-26 onward requiring detailed disclosure of each transaction. Individuals typically file using ITR-2 for capital gains or ITR-3 if reporting business income. Accurate recordkeeping of transactions, exchange statements, wallet addresses, and valuations is essential to withstand audits and scrutiny.
Deadlines for filing income tax returns are July 31, 2025, for non-audit cases and October 31, 2025, for businesses requiring audit. Non-compliance carries penalties including interest, fines, and potential prosecution for evasion.
Challenges Facing Crypto Traders
Despite regulatory clarity in certain aspects, traders face ongoing difficulties such as:
- Ambiguity in tax treatment for decentralized finance (DeFi) operations and NFT transactions
- Complexities in tracking frequent trades across multiple domestic and international platforms
- Issues related to cross-border transactions, including Foreign Exchange Management Act (FEMA) compliance and double taxation risks
- No provision for tax relief on lost or stolen digital assets, complicating reporting and liability
Moreover, profits on foreign exchange platforms remain taxable in India and must be declared in income tax returns, potentially triggering additional regulatory scrutiny.
FinOracleAI — Market View
The introduction of a uniform 30% tax rate and comprehensive TDS mechanism signals India’s intent to rigorously monitor and tax the growing crypto sector. While this enhances regulatory clarity, the high tax burden and stringent reporting requirements may dampen short-term trading activity and deter smaller investors. Compliance challenges, particularly around DeFi and cross-border dealings, create risks of inadvertent non-compliance.
Investors and platforms should closely monitor evolving clarifications from Indian tax authorities and judicial interpretations, especially concerning loss treatments and DeFi taxation. Improved compliance tools and detailed recordkeeping will be critical to managing tax liabilities effectively.
Impact: neutral
