Crypto Trading-Taxability

Crypto Trading Tax liability

A person invested US $5000 in a Crypto high risk high profit investment in January 1st week.
Based on the advice and trading signals he's getting, the trades 4 times a day.
Each days trading profit is accumulated and traded next day.
In this trading, he has withdrawn his original investment of US$ 5k by mid February.
Now his investment as on date is US$ 12k and expected to reach 18k by 31st March is lying as USDT in a crypto trading exchange.
Another aspect to be kept in mind is there's no guarantee whether you will be able to withdraw the balance.

The question is whether is it sufficient to offer to tax on the amount withdrawn and report the investment balance in ITR? Or to pay tax on the difference of investment and balance outstanding plus amount withdrawn to tax and report balance outstanding in ITR?

Tax Liability on Crypto Trading in India (FY 2024-25)

Under Indian tax laws, crypto trading is taxable under Section 115BBH introduced in Budget 2022. Based on your case, the following tax implications apply:

1. How is Crypto Taxed in India?

✔ Flat 30% Tax on Gains: All profits from crypto trading (including USDT holdings) are taxed at 30% + 4% cess under Section 115BBH, with no deductions (except cost of acquisition).
✔ 1% TDS on Transactions: TDS @ 1% under Section 194S applies on crypto sales if transactions exceed ₹50,000 (for individuals not in business).
✔ Losses Not Adjustable: Crypto losses cannot be set off against other income (salary, capital gains, business income, etc.).

2. Tax Calculation for Your Case (Crypto Trading in USDT)

(a) Taxable Amount – Not Just Withdrawn Funds

❌ You cannot pay tax only on withdrawn amounts.
✅ You must pay tax on total realized profits, even if reinvested.

Since you trade 4 times a day, every realized profit is taxable, regardless of whether you withdraw or reinvest.

3. Taxable Income Breakdown

Date	Investment (US$)	Value (US$)	Realized Profits (Taxable)	Withdrawn (US$)
Jan Start	5 Thousand	5 Thousand	-	-
Mid-Feb	5 Thousand	12 Thousand	7 Thousand (Taxable)	5 Thousand
March 31	12 Thousand	18 Thousand	6 Thousand (Taxable)	0

📌 Total Taxable Crypto Profit = $7 Thousand (Feb) + $6 Thousand (March) = $13 Thousand
📌 Total Amount Withdrawn = $5 Thousand (But withdrawals don’t affect taxability).

4. Tax Treatment in ITR

Category	Amount (US$)	INR Equivalent ( @ ₹83/USD)	Tax Rate	Tax Payable (₹)
Total Crypto Profit	$13 Thousand	₹10 Lakh 79 Thousand	30% + 4%	₹3 Lakh 36 Thousand Four Hundred Eighty Eight
Withdrawn Amount	$5 Thousand	₹4 Lakh 15 Thousand	Not Relevant	N/A

5. What If You Can’t Withdraw the Crypto?

📌 Even if withdrawal is uncertain, tax must be paid on realized profits.
📌 If exchange collapses before withdrawal, no tax is required (but must prove loss in future claims).