Crypto adoption in India is rising fast, with digital assets becoming a top choice for investors across metros and smaller towns. As the ecosystem matures, tax clarity is improving, helping traders and investors stay informed, confident, and compliant. In this blog, we simplify the key crypto tax rules, rates, and reporting steps. To make filing effortless, ZebPay has partnered with ClearTax. Use coupon code CTZEBPAY to get up to 70% off, exclusively for ZebPay users.
What is Crypto Taxation?
Crypto taxation refers to the process of declaring and paying taxes on any income or gains made through crypto assets and other virtual digital assets. This includes activities like buying and selling crypto, trading between different tokens, or using crypto as a means of payment. Even though India still doesn’t have a regulatory framework for crypto assets, the government has introduced tax provisions to ensure that such transactions are recorded and the earnings are brought under the tax net.
The idea behind crypto taxation is to bring transparency and accountability to this fast-growing digital economy. By bringing income from virtual assets under the tax net, authorities seek to ensure transparency, encourage responsible participation, and lay the groundwork for more defined regulations in the evolving crypto landscape. For investors and traders, understanding crypto taxation is essential to stay compliant and avoid any legal or financial complications.
Understanding Virtual Digital Assets (VDAs)
- The Union Budget of 2022 officially introduced the concept of Virtual Digital Assets (VDAs) into India’s financial framework.
- To enable proper taxation, Section 2(47A) was incorporated into the Income Tax Act, offering a formal definition of VDAs.
- VDAs include
- Crypto assets like Bitcoin, Ethereum, etc.
- NFTs (Non-Fungible Tokens)
- Other digital tokens created using cryptographic techniques
- The definition excludes
- Indian and foreign fiat currencies
- Gift cards, vouchers, loyalty points, and similar instruments
- This classification brought clarity and made gains from crypto and NFTs taxable in India.
- It was a key step in acknowledging digital assets in the Indian financial and tax system, even though crypto is not yet fully regulated.
Key Tax Rules to Keep In Mind
- Any profit earned from trading, selling, or exchanging VDAs, including crypto assets and NFTs, is subject to a flat tax rate of 30%, plus applicable surcharge and cess.
- The tax applies regardless of whether the income is classified as capital gains or business income.
- A 1% TDS (Tax Deducted at Source) is applicable under Section 194S when the total transaction value crosses Rs. 50,000 in a year (Rs. 10,000 in certain situations).
- No deductions are allowed while calculating taxable income from VDAs, except for the original purchase cost.
- Gifts of digital assets are also taxable. In such cases, the recipient must pay tax on the fair market value of the asset received.
- These tax provisions apply to all types of investors, whether individuals or businesses dealing in digital assets.
- Both short-term and long-term gains from VDAs are taxed at the same flat rate, offering no advantage for longer holding periods.
- Losses incurred from VDAs cannot be set off against any other income, including profits from other digital assets.
- All income from VDAs must be filed under ‘Schedule VDA’ with regard to your Income Tax Return (ITR).
Filing Made Easy with the Right Support
Navigating the crypto taxation landscape may seem overwhelming at first, but with the right information and trusted tools, it becomes much simpler. As the industry continues to grow, so does the need for accuracy, clarity, and compliance in how we report and manage our digital asset earnings.
To support you in this journey, ZebPay’s collaboration with ClearTax, one of India’s leading tax platforms, is here to support and guide you while making crypto trades, transfers, and gains can be seamlessly tracked, calculated, and filed, all in one place. Whether you’re a first-time filer or a seasoned crypto investor, this partnership is designed to take the guesswork out of tax season and help you file with confidence. Because at the end of the day, staying compliant shouldn’t be complicated. And with ZebPay and ClearTax by your side, it won’t be.
