Less than two weeks are left for the deadline to file the income tax return (ITR), which ends on September 15. In case you had invested in cryptocurrencies during FY 2024-25, it is important to correctly report the transactions.
Here, we list key points that taxpayers should keep in mind when reporting income earned from cryptocurrencies on their tax returns.
Investors should remember that they can earn gains from the sale of cryptocurrencies as well as from mining, airdrops and staking.
If you are a cryptocurrency investor, you should know how crypto gains are taxed in India.
Crypto income: Key points to know
1. Profits from the sale of crypto assets are taxed at a flat rate of 30 per cent.
2. There is a 1 per cent TDS, which is levied on all crypto transactions.
3. How to report it: Crypto income can be taxed under the head Business or capital gain.
“Where the income is being reported as business Income, ITR-3 is required to be filed,” says Pratibha Goyal, partner, PD Gupta and Company, a Delhi-based CA firm.
4. Notably, crypto losses cannot be carried forward or set off. If a taxpayer reports crypto income under the head of capital gain, they need to file ITR-2.
5. Airdrops: Receiving free tokens through airdrops is considered taxable income. The fair market value of the tokens at the time of receipt is added to the individual’s income and taxed as income from other sources. If these tokens are sold later, any capital gains are subject to tax.
“Tokens received via airdrops are considered taxable income, with the fair market value (FMV) at the time of receipt added to the individual’s income. If sold later, capital gains tax applies based on the FMV as the cost of acquisition, taxed at a flat rate of 30 per cent under Section 115BBH,” says CA Shefali Mundra, tax expert at ClearTax.
6. Mining and staking: Cryptocurrency earned through mining is considered income from other sources. For the unversed, mining refers to the process of validating crypto transactions, recording them on a blockchain ledger, and releasing new coins into circulation.
The FMV of the mined tokens at the time of receipt is added to the individual’s total income and taxed as income from other sources.
“Similar to mining, rewards earned through staking are treated as income. The FMV of the staked tokens at the time of receipt is included in the individual’s income and taxed as income from other sources. Any capital gains from the sale of these tokens are subject to tax,” adds Shefali Mundra.
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