How to report crypto income in the ITR?

Over the years, digital assets like cryptocurrencies and NFTs have gained immense popularity, and many have started to try their luck investing in these.

Now, earlier, the tax laws for these assets were quite hazy in India. However, with increasing participation of investors, the government introduced new sections for the taxation of cryptocurrencies or any virtual digital asset for that matter.

What is the tax rate for cryptocurrencies?

Compared to other asset classes, where your tax rates depend on whether the gains are short-term or long-term, for cryptocurrencies, a flat 30% tax is levied. So, if you have profits of ₹1L, the tax liability would be ₹30,000.

A 1% TDS will also be applicable on sell transfers if the aggregate amount exceeds ₹50,000 for a financial year.

Are crypto profits treated as capital gains or business income?

Just like stocks, the reporting of digital assets is also based on intent. You need to declare them as capital gains if they are held as investments. If crypto/NFTs are held for trading purposes, then the income is considered business income. However, regardless of how you choose to report them, the tax rate will remain the same at 30%.

Can I claim any deductions?

No, none of the deductions, including the basic exemption, are allowed when you have income from crypto. However, you do get a rebate up to ₹25,000 on the tax liability.

Can I carry forward crypto losses?

Unfortunately, unlike other assets, you cannot carry forward your losses from digital assets. Additionally, you can’t offset crypto losses against any other income in the same year. Further, losses under any other income head cannot be set off against income from digital assets.

How do I report crypto income in the ITR?

In 2022, Schedule VDA (Virtual Digital Asset) was introduced to facilitate reporting of income from digital assets like crypto and NFTs.

Here, you’ll have to fill in details like:

  • Date of acquisition/purchase
  • Date of transfer/Sale
  • Income head under which you want to report (Capital Gains/Business Income)
  • Cost of acquisition
  • Sales consideration received
  • Income from the transfer of virtual digital assets (enter nil in case of loss)

Once you enter all these details, the tax will be calculated at a special rate of 30%. As mentioned, you will not be able to claim any deductions or expenses in the case of crypto income.

Will the tax liability change based on which regime I opt for?

No, for incomes that are charged at special rates, the selection of the regime will not make a difference in your tax liability.

If you have any doubts, ask 'em below.

4 Likes

Hey, I am using the e-filing feature provided by Quicko, I only have 2 crypto transactions and I want to report those under Capital Gains.

Under, Incomes → Capital Gains → Add → Add Trades Manually
It clearly mentions that “report your crypto taxes here.” , but still when I am trying to report it, which “Asset Type” should I select for mentioning Crypto transactions?

Hi @Amritansh_k

Currently, we are not supporting crypto income in our platform, our team is working on it to enable the functionality.

However, we offer an alternative option called expert assistance, where you can Book a MEET and connect with one of our tax experts who will guide you to report the crypto transactions and filing the ITR.

Hi

I trade crypto perpetual futures on the binance platform. I understand that in the traditional world, when trading derivatives, we can treat that operation like a business because we are trading the derivatives of the underlying asset and not the actual asset itself.

I know that a similar rule is applicable for crypto as well and for this reason we don’t have to pay the TDS of 1% on crypto derivatives trading transactions. Is my understanding correct?

Does that also mean that we can offset the losses against profits in crypto derivatives trading, since it basically qualifies as a business? Meaning we only have to pay 30% + 4% tax on (profits - losses) from crypto derivatives trading.

Also, does quicko support tax accounting for crypto derivatives trading transactions?

Prompt responses from people familiar with the crypto tax rules would be really helpful.
Thanks

Hi @Muskan_Balar @Shrutika_Shah
these rules are for spot crypto trading. I am specifically asking about crypto derivatives. can we not present crypto derivatives trading as a business and offset the losses against profits?

can someone from the tax qna team please answer my query?

everywhere I see tax rules for crypto they are about trading the actual underlying crypto assets (i.e. spot trading). tax rules about trading crypto derivatives (futures and options) are not mentioned anywhere.

even the above article about crypto income by @Muskan_Balar seems to be about spot trading and doesn’t mention anything about crypto futures and options.

thanks

Hi @yasharma02

As per Indian law, a TDS of 1% is levied on all crypto sale transactions.

No, crypto losses cannot be set off against crypto profits for trading.
You can read about Tax on Cryptocurrency, NFT & VDA (Virtual Digital Asset) - Learn by Quicko

The Quicko DIY product does not as of now support the taxation of crypto. However, you can book a MEET, where you can connect with a tax expert who will help you file your return along with crypto income/loss.

Thanks for the response @Shrutika_Shah
I understand what you are saying and I also read the article that you mentioned. But my question regarding treating it as a business activity still remains unsolved.

In the article it is mentioned that “As per Section 2(47)(A) of the Income Tax Act, a Virtual Digital Asset (VDA) includes cryptocurrency, Non-Fungible Tokens (NFTs), and any other digital asset notified by the central government in the official gazette.”

This does not say anything about the derivatives of VDA i.e. futures and options. That’s why I am still confused around it.

Based on treatment of futures and options in traditional markets (equity, forex, commodities), trading of derivatives can be treated as a business and therefore losses can be offset against profits.

My question is does this rule apply to derivatives of VDA as well?

I have a question:

  1. I buy Crypto (VDA) from CoinDCX Exchange. I buy using INR. (they don’t deduct TDS) but if i sell the same crypto on their website, they deduct TDS, but i am not selling the purchased Crypto on their website. Instead I transfer it to my Wallet and then sell it to some individual.

  2. Now suppose i transfer the Crypto purchased from CoinDCX exchange and sell it to some XYZ person using P2P method i.e. Person to Person, so the Buyer has to deduct TDS? Or I have to deduct TDS? The amount range is between 1000₹ to 100000₹

So in this case i have to deduct TDS or the Buyer will deduct? Thanks

Hi @_S_Batra

The buyer has to deduct the TDS from the sales consideration given to you.

Hi @yasharma02

Yes, VDA can be treated as business income, if you hold the VDA for sale in the regular course of business.
However, as per the law, loss from VDAs cannot be set off against any other income.

Hope this helps.

Can someone please confirm if we need to file ITR for crypto transactions done before April 1 2022. TIA.

Hi @Surenwiz93

You’re required to report all the crypto transactions in Schedule VDA from 1 April 2022 to March 31 2023 while filing for FY 2022-23/AY 2023-24.

Thanks. Do we need to record the transactions done before April 1 2022 in ITR portal for previous Assessment year then or there is no need to record those details anywhere ? Apologies for being a novice.

Hi @Surenwiz93

Any crypto transactions before April 2022 were to be reported while filing for FY 2021-22/AY 2022-23.

Hence. previous AY’s crypto need not be reported in this year’s filing.

When is Quicko team planing to introduce crypto filing ? will it be ready by next year ?

Hi @jaycyborg

We are working on the same and planning to go live with it soon.

if the person has is NIL income in the year except the income of Rs.2 lakhs in crypto trading

do the person still needs to pay tax @30% ?

@Shrutika_Shah
@Bharti_Vasvani
@Muskan_Balar

Hey @HIREiN,

Yes, the income from crypto trading will taxed at flat 30%.

yes . but the tax has to be paid even though the total income is less then 2.50 lakhs in the year ?