All The Important Income Tax Rules on Crypto Gains

Learn about all you need to know about the income tax rules on the taxability and tax deduction on cryptos and other virtual digital assets

Income Tax Rules

Crypto gains were brought under the tax ambit last year and became applicable for ITR filing 2022-23. Hence, anyone who has made crypto gains during the year will have to disclose the same during income tax filing.

  • Income tax on crypto was introduced in last year’s budget
  • Tax is applicable at a flat rate on all crypto gains
  • There are various crypto transactions that attract TDS 
  • There are penalties and punishments for failure to comply with these tax rules

Also ReadPaying 30% Tax on Your Income? Choose From These Tax-saving Options and Save  

How Are Crypto Gains Taxed?

In 2022, the government created a new category called Virtual Digital Assets (VDA) and introduced the framework for taxing VDAs like cryptocurrency and Non-Fungible Tokens (NFT). Section 2(47A) was introduced for this framework with the necessary rules and regulations to impose taxes on these.

The Union Budget for 2022-23 stated the applicability of crypto tax at 30% of the gains earned. This rate is applicable irrespective of the income tax slab of the individual.

Besides, a TDS of 1% is applicable on each transaction for the transfer of crypto assets. 

Also Read: Demystifying the Indian Crypto Tax Landscape  

Various Aspects of Crypto Tax Filing

Here are some of the basic aspects of crypto taxation:

  • 30% income tax is applicable when the VDA is sold for money, traded for crypto (including stablecoins), or spent on goods and services
  • Tax is levied at the individual’s applicable tax rate if the income tax department deems the receipt of crypto as income. This can be in situations like receiving crypto as a gift, mining coins, receiving salary in crypto, staking rewards, and airdrops
  • TDS of 1% has been applicable on crypto transactions since 1 July 2022. When traded on Indian exchanges, it is collected by the exchange. Alternatively, it is collected by the buyer when traded on P2P platforms or international exchanges. In the case of crypto-to-crypto sales, TDS is applicable to both the buyer and the seller
  • If an individual fails to deduct TDS on a crypto transaction, a penalty equivalent to the TDS amount is levied. If TDS is not paid to the government, the taxpayer may face a prison sentence ranging between 3 months and 7 years, coupled with a fine as well.
  • The losses incurred on crypto cannot be set off against crypto gains or any other gains. Moreover, crypto-related expenses are not allowed, other than the purchase price or cost of acquisition.

Also Read: Survival of Crypto Currency In 2023! 

Final Words

If you have done any crypto transaction that attracts income tax liability, you must disclose the same in your income tax return to avoid falling foul of the law since the penalty can be quite severe. Besides, you will also need to comply with the TDS requirements related to VDAs. 

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Also ReadHow To File Crypto Taxes In 2023 As An NRI?  


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