Crypto tax in India: Schedule VDA, 30% tax, how investors should file ITR

Cryptocurrency in India has transformed from a niche interest to a relevant digital asset class despite its legal ambiguities. While Bitcoin and Ethereum lack legal tender status, the government has started to regulate them through tax policies.

In the Union Budget of 2022, cryptocurrencies and NFTs were classified as Virtual Digital Assets (VDAs) under the Income Tax Act, subjecting them to a flat 30% tax on profits and a 1% Tax Deducted at Source (TDS) for transactions exceeding Rs 10,000—increasing the tax burden further with a 4% cess. The Union Budget of 2025 introduced a mandatory reporting mechanism for VDAs via Schedule VDA in the Income Tax Return (ITR).

Crypto exchanges must provide transaction data, enhancing compliance and curbing evasion. Investors must use appropriate ITR forms: ITR-2 for capital gains, ITR-3 for business income, and ITR-4 for presumptive taxation. Proper classification of income and diligent record-keeping are crucial for tax filings, including documenting airdrops and staking rewards. Cross-referencing TDS with Form 26AS and disclosing foreign holdings is also necessary.

With evolving regulations, meticulous reporting under Schedule VDA is essential to avoid penalties and ensure accurate taxation of crypto gains, highlighting the government’s focus on integrating virtual assets into the economy while enforcing compliance.