How is income from cryptocurrency or other virtual digital assets taxed in India

Question

I bought and sold some cryptocurrency during the year and made a profit, and I am not sure how to report this in my tax return. I would rather settle this without going to court if the law allows it, but I need to know my rights before I sign anything. Please tell me what to do first and what document to keep.

MyVakeel Legal Desk · Accepted Answer

Under Indian law, Income-tax Act, 1961, Section 115BBH is the starting point for this tax law question. What follows is the position in substance, together with the steps that usually make the difference in practice.

Section 115BBH of the Income-tax Act, 1961 taxes income from transfer of a virtual digital asset, which covers cryptocurrency and similar assets as defined under Section 2(47A), at a flat specified rate, without allowing deduction of any expenditure other than the cost of acquisition, and without permitting set-off of a loss from one virtual digital asset against gains from another virtual digital asset or against any other income.

This flat-rate, no-set-off treatment is distinct from the ordinary capital gains framework applicable to shares or property, and it applies regardless of how long you held the asset, so there is no long-term versus short-term distinction and no benefit of a lower rate for longer holding periods for virtual digital assets under Section 115BBH.

Section 194S requires the buyer, or in the case of an exchange transaction the exchange, to deduct TDS on payment for transfer of a virtual digital asset once the aggregate value of transactions during the year crosses a specified threshold, and this TDS is available as credit against your final tax liability computed under Section 115BBH when you file your return.

Since losses on one virtual digital asset cannot be set off even against gains on another virtual digital asset, it is important to compute gains and losses transaction by transaction rather than netting your overall crypto portfolio performance, and to maintain detailed records of each acquisition and disposal, including the exchange statements, since the flat computation still requires accurate cost tracking.

What this means for you: 1) Maintain detailed transaction-wise records of every virtual digital asset purchase and sale; 2) Compute gains separately for each asset without netting losses against other assets; 3) Claim credit for TDS deducted under Section 194S; 4) Report virtual digital asset income in the specific schedule provided in the return form.

Where the facts are disputed, what usually decides a cryptocurrency tax india matter is the paper trail — dated complaints, acknowledgments and written replies under Income-tax Act, 1961, Section 115BBH. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in tax law.