Crypto Reporting in ITR: Rules and Filing Tips

Chaitra Seetharam , Last updated: 05 September 2025
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The Indian government has rapidly advanced the regulatory framework for cryptocurrency taxation, prioritising transparency and compliance. Under recent amendments to the Income Tax Act, Virtual Digital Assets (VDAs)—a category now encompassing cryptocurrencies and NFTs are clearly defined. This mandates all taxpayers to meticulously report their VDA transactions and capital gains in their annual income tax filings.

The Indian government classifies cryptocurrency as a Virtual Digital Asset (VDA) and enforces strict tax regulations. Since 2022, a flat 30% tax has been levied on all crypto profits, and a 1% TDS has been deducted on the transfer of most assets.

For FY 2024-25 (AY 2025-26), taxpayers must meticulously report every transaction in the new Schedule VDA of the ITR form, making accurate recordkeeping and compliance essential for all investors and traders.

Crypto Reporting in ITR: Rules and Filing Tips

Key Rules for Crypto Reporting

Flat 30% Tax Rate: All income from crypto is taxed at a flat 30%, plus applicable surcharge and cess. Only the purchase cost can be deducted; crypto losses cannot be used to reduce tax on other income.
1% TDS on Transactions: A 1% TDS (under Section 194S) is required on the sale value of crypto when total transactions exceed ₹50,000 per year (₹10,000 for certain taxpayers).
Report All Crypto Income: You must declare all crypto income, including from trading, mining, staking, airdrops, or salary, regardless of whether it was earned on regulated or offshore platforms.
Use Schedule VDA in ITR: A dedicated section for Virtual Digital Assets (VDAs) is now mandatory in Income Tax Return (ITR) forms for full disclosure.
Penalty for Non-Disclosure: Starting February 2025, any unreported crypto income discovered during a tax search can be treated as undisclosed income and taxed at a steep rate of 60%.

Which ITR Form to Use

ITR-2: Use this form if you are an investor and report your cryptocurrency earnings as Capital Gains.
ITR-3: Use this form if you are a frequent or professional trader and report your cryptocurrency earnings as Business Income.
Schedule VDA: This specific section, which details all your cryptocurrency transactions, must be completed in both ITR-2 and ITR-3.

Purpose	ITR Form	Tax Rate	TDS Rate	Deadline
Capital Gains	ITR-2	30%	1%	July 31
Business Income	ITR-3	30%	1%	July 31

Filing Tips for Crypto Reporting

Meticulous Record-Keeping: Document every transaction's date, type (buy/sell/trade), asset, value in INR, and fees. This is essential for accurate cost calculation and compliance.
Leverage Tax Software: For active traders, use platforms like Koinly, CoinLedger, or ClearTax to automate gain/loss calculations by syncing with your exchanges and wallets.
Reconcile with Official Forms: Cross-check your records against the Annual Information Statement (AIS) and Form 26AS from the tax portal to ensure the data reported by exchanges matches yours, preventing notices.
Classify Income Correctly: Determine if your activity qualifies as investment (Capital Gains) or frequent trading (Business Income), as this dictates whether you file ITR-2 or ITR-3. Seek professional advice for clarity.
Prioritize Full Transparency: Do not hide transactions. The tax department tracks crypto activity via TDS and exchange data. Non-disclosure can result in severe penalties (up to 200% of the tax owed) and legal action.
File an Updated Return if Necessary: If you previously failed to report crypto income, you can correct it by filing an Updated Return (ITR-U), though additional tax and interest will apply.

Common Mistakes to Avoid

Not using Schedule VDA or misreporting transaction nature.
Missing TDS or failing to reconcile exchange records.
Investing through non-compliant platforms—risking errors and missing notices.
Not reporting airdrops, gifts, or minor crypto income.

The mandate for cryptocurrency reporting via Schedule VDA demonstrates the government's strategic objective to assimilate digital assets into the mainstream financial framework and deter tax avoidance. Ensuring compliant filing necessitates rigorous record-keeping, the selection of the appropriate ITR form, and a comprehensive grasp of the applicable tax, TDS, and GST regulations. Noncompliance carries substantial risks, including heavy penalties and the potential for undisclosed income to be taxed at punitive rates. In conclusion, navigating India's regulated crypto landscape safely and effectively requires a proactive understanding of its evolving rules and a commitment to full transparency.